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23 Dec 2010
AS MANY AS 50,000 small businesses could be fined by the taxman for failing to keep proper tax records.
Under a HM Revenue & Customs consultation, the taxman wants to delve into 50,000 of the two million SMEs it believes have poor record-keeping that has led to unpaid tax.
The Business Records Checks consultation could see fines of up to £3,000 for those HMRC finds have unpaid tax liabilities through poor book-keeping.
HMRC's aim is to improve book-keeping in 40% of the 4.9m SME community where records have been found wanting.
The 2008 Finance Act gave HMRC the power to investigate up to 50,000 business records, beginning in the second half of 2011.
In the consultation, HMRC is exploring how to implement the penalty regime, including the timeframe in which to allow record-keeping to be brought up to standard.
Forcing these SMEs to keep better records will benefit tax advisers, HMRC suggests in the paper, as poor book-keeping adds to advisers' admin burden.
The businesses will benefit from improved financial management which in turn will boost their chances of survival. Those seen to be fulfilling their obligations will likely have a lower chance of a subsequent compliance intervention from the taxman.
The consultation ends on 28 February.
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Visitor comments Add your comment
Pots and kettles....
Let's start with HMRC book-keeping. PAYE and tax code fiasco anyone? Mine still isn't right.
Posted by: Winston smith, 23 Dec 2010 | 11:19
Good !
Good about time standards were improved. Will support those that make an effort.
Posted by: Spike, 23 Dec 2010 | 11:28
HMRC - extra investigations
I think it is nearly time that the law makers should be investigated and fined not the poor small companies or businesse. They have enough problems running the business. This is just another worthless exercise. HMRC can't get their own house in order.It seems this will just create extra revenue for the government,
Posted by: Sanderson, 23 Dec 2010 | 11:53
Wrong target?
HMRC would be better off targeting those that don't keep any records at all. Clearly it is too much effort to find and tax those "businesses" who aren't registered with HMRC.
Posted by: Richard, 23 Dec 2010 | 12:20
Believe it when it happens
HMRC do not have the staff to have a phone line at their CIS office.
The call centre staff read from the same manual website we can see.
Their optimism is misplaced.
The only people who will make money out of this will be accountants waltzing round the numbers that HMRC want that are not backed up by client evidence.
Posted by: Eleanor, 23 Dec 2010 | 12:34
Extra Revenue
I think that is the aim of the exercise to get more revenue for the government. If successful - It cant be worthless!
Posted by: Milano, 23 Dec 2010 | 12:35
what is adequate?
How are the revenue going to define adequate book keeping. I have a large number of clients that bring in a carrier bag full of invoices, bank statements etc and to me that is perfectly adequate. I have all the prime records I can see what income has come in and I can see what has gone out and if there is cash income that has not been included it is very easy to see because there will be an excess of cash expenses. The people that bring their records in this way do so because they are do not have the know how or the time to complete proper books. If I thought the figures I produced from these records were not accurate I would refuse to submit them. To fine such people £3,000 is completely inequitable and does this then open the door for us to send a similar penalty to the Revenue for the taxpayers that have suddenly received a tax bill out of the blue because of inadequate book keeping at HMRC?
Posted by: Karen Whitehead, 23 Dec 2010 | 13:27
Lost for words
Just after revenues for the Gov!!! this would probably cost more than the revenue and fines collected as with small business some error of margin is possible but hey we wont to bomb afghan and iraq for next 30 years so got to raise money somehow
Posted by: Mohammed Walji, 25 Dec 2010 | 23:17
Keeping proper records is essential to success
Time was when it was challenging for SME's to keep full accounting records, systems etc but now with the advent of low cost on-line accounting systems from the likes of Liquid Accounts for £20 per month there are no excuses. Regardless of HMRC its good business sense to keep proper accounting records. Indeed a recent survey done by Yorkshire Forward showed that 80% of businesses that use IT succeed and 80% of those that don't fail!
Posted by: Richard Doyle, 28 Dec 2010 | 14:11
Hear! Hear!
Well voiced, Mr Sanderson.
Posted by: Clarke, 02 Jan 2011 | 23:00
Cynical: Moi?
Reading the Consultative Document, it states that 50,000 investigations will take place annually over four years........
Now, HMRC don't plan to invoke the maximum and extant penalty of £3,000 for each and every case: they say.
However, HMRC state within this document they expect to raise some £600 million through the exercise.
4 (years): X 50K (Annually); X £3,000.
Well, would you believe it!
The resultant just happens to be, £600 million!
A cynical exercise in revenue harvesting.
Additionally, timing the launch just prior to the close of the happy manic Self-Assessment period was - coincidence?
OK: one accepts that since the introduction of the Self Assessment Regime and more critically, since 1997, the self-employed (which form the rump of bottom echelon SMEs, as Class Size Zero activities), have been obliged to keep proper records: since it became a statutory offence to fail to so do: as it has under Companies Act for many years.
Why wait for 13 years?
Surely, some gesture towards mandatory training firstly for ALL would be entrepreneurs (As in France e.g.) ought to have been a primary and essential first step?
Particularly so, as the growth of self employment has been driven by the core realities of unemployment and lack of opportunity.
My considerable experience of SME records allows me to realise many of the self-employed cannot even write and spell properly: let alone count correctly!
And as for possessive apostrophes.................
Posted by: Michael C Feltham, 05 Jan 2011 | 11:49
Beyond the pale
Yet again the target is the easy self employed. They try their best, work the hardest, pay teh most as a percentage, get no benifits from all the NIC they pay, and now HMRC want to bully them into fines. Who'd want to work in Britain???
Posted by: Ernest Thomson, 05 Jan 2011 | 18:05