Business News
HRMC’s Checks on SME Record Keeping is Flawed
The Institute of Chartered Accountants of Scotland (ICAS) has come forward to state that the HRMC’s checks on record keeping by SMEs are flawed, following a formal consultation on the issue.
Whilst HRMC envisages that each visit, averaging half a day, will cost a business £54, ICAS estimates that the real cost at over 10 times more than HMRC’s estimate at a more realistic £560 per visit, and predict an administrative nightmare ahead if plans to implement the checks go through.
The £562 price tag put forward by ICAS per visit looks like this;
1 hour preparatory meeting between the business (£50 per hour) and its accountant (£75 per hour) = £125
3½ hours spent by the business (£50 per hour) and its accountant (£75 per hour) in dealing with HMRC visit = £437
Ian Dewar, convener of the ICAS Small Business Tax Sub-Committee, said: “Experience of our members in practice suggests that poor record keeping, where it arises, can often result in their clients paying too much tax. This comes about because good practitioners take a prudent line in preparing accounts and this often flexes the end result, the tax payable, in favour of HMRC.
“HMRC’s basic assumption seems to be that SMEs with poor records have chosen to have poor records. This is a misconception. Those with the courage and tenacity to embark on new business ventures are forced to battle from the outset against a mass of government regulation and red tape. Typically they don’t go into business because of their record keeping skills.
“HMRC should be looking for positive ways of encouraging taxpayers to maintain adequate records, rather than adopting a big-stick approach that we believe will cost owner managers a lot of resource that could have been better directed towards growing their businesses.”
ICAS have said that they would support properly targeted and structured visits, but this does not match the 50,000 visits planned over the next four years by the HRMC, who have produced a guide to assist SMEs with said record checks, including invoicing, receipts, deductions and how best to keep abreast of the paperwork.
