Local businesses could face fines of up to £3,000 this year if they don’t have up-to-date records as part of a new HM Revenue & Customs (HMRC) crackdown, a South West accountant is warning.
The new Business Record Checks, which are due to start in July, will target 50,000 SMEs annually with the aim of raising £600m over the next four years.
Paul Morris, director of tax planning at Bath-based Target Chartered Accountants, explains:
“HMRC has the power to inspect business records at any time and for any reason; however, up until now these kinds of random checks have been rare.
“HMRC statistics show that 40 per cent of SMEs have poor tax records. This means that two in every five SMEs could be at risk of a Business Record Check sometime in the future.
“Furthermore, a new electronic format for filing corporation tax returns and financial statements online will be launched this year, called iXBRL. The official line is that this will improve efficiency, but it will also enhance HMRC’s ability to identify areas of potential query significantly. The likely result is that the upward trend in Business Record Checks and other HMRC inquiries will continue further,” he warns.
According to Paul, the majority of the £600m revenue HMRC expects to raise will be from penalties. “The checks, which will assess the accuracy and adequacy of records, will be backed up by a
tariff-based penalty regime for failure to keep proper records,” he explains.
“Whilst it is likely that some of these checks will be made by telephone or letter, HMRC is launching a new record check process which could include making onsite visits to business premises. These can be made at any time, with only seven days notice.
“Aside from the loss in business time, these types of inquiries can be very intrusive and stressful even if business records are found to be in order.”