Business Records Checks
13th May 2011
Could your poor records result in you paying too much tax?
In 2008, HM Revenue & Customs (HMRC) obtained new powers to enter a business premises and inspect the business record, where this is ‘reasonably required’ to check a ‘tax position.’ Previously, they had only been able to check records supporting a filed VAT return or tax return. However, now they are able to check your records of current transactions, before you have even submitted your VAT return or tax return.
Up until now, we have not seen much use of these powers. However, HMRC has announced that it intends to undertake significant numbers of ‘Business Records Checks’ starting in the second half of this year. The purpose of this exercise is to identify potential cases of under-declared tax – the aim is to reduce the loss to the Exchequer that stems from poor business records. HMRC officers are visiting businesses which are deemed to be ‘high risk’. The most obvious ‘high risk’ area (as far as HMRC is concerned) is businesses which handle cash. In most cases they will give seven days’ notice. If you receive a notice of a visit, then it is very important that you contact your accountant as you may benefit from some help and assistance in dealing with the visit. HMRC has the power to issue penalties to businesses with poor business records – at a maximum of £3,000 this could be a huge unwanted cost. Although HMRC says it will impose penalties only in extreme cases, it may give you an incentive to take steps to get your business records in good order. Just think – it could be that poor records are resulting in you paying too much tax!Author: Emma Glover (emma.glover@rowlandsaccountants.co.uk)