Taxman reinstates business record checks

by Calum Fuller

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28 Nov 2012

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HMRC Whitehall

BUSINESS RECORD CHECKS are to be incrementally reinstated by HM Revenue & Customs across the UK over a 14-week period.

The programme will initially be rolled out in London and East Anglia in November, before the south east, Scotland and Northern Ireland join on 14 January 2013. Central England will join on 21 January, with the east following a week later along with north Wales and north-west England. Finally, south Wales and south-west England will join on 4 February.

A pilot programme of business records checks, introduced to some consternation among the advisor profession,  was commenced by HMRC in April 2011. Up to 17 February this year, 3,431 business records checks had been carried out on the records of small business taxpayers. They found 36% of businesses visited had some issue with their record keeping, with 10% of all businesses visited having issues serious enough to warrant a follow-up visit.

With the underlying legislation unchanged, HMRC has powers which enable it to visit any business premises to examine its records.

Under the scheme, compliance checks can then be carried out to check tax affairs, with issues around PAYE and penalties available to scrutiny. Claims pertaining to the eligibility for tax credits can also be advised upon.

HMRC will be required to provide seven days' notice, either verbally or in writing, while obstructing visits may incur penalties of £300, with additional penalties of £60 per day until the obstruction has been removed and the documents made available. 

HMRC said the programme will be "more streamlined, targeted and better-focused" than its previous incarnations.

Director of local compliance Richard Summergill said: "The visits offer benefits for businesses at risk of keeping inadequate records. Adequate records help businesses pay the right amount of tax at the right time, thereby avoiding interest and penalties for errors and late payment, whilst also giving HMRC greater assurance when a business submits its tax returns."

Menzies tax partner Richard Godmon said: "Keeping business and private matters completely separate will help in limiting the scope of a compliance visit or enquiry. If there is a lack of control over the distinction between business and private items, HMRC can ask for personal information as well as the business records."

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