Would Your Books Pass The Records Check?

Ray Stewart Bookkeeping, General, Tax Matters Leave a Comment

That is a question to ponder on….

Of course you would say YES – but would HMRC agree??

Our beloved government has issued a number of new tools on the HMRC website to allow you to test whether your records may be up to scratch at the same time announcing they are going to launch a Business Records Check programme later this year.  These checks will (yes, you guessed it) impose penalties for significant record-keeping failures relating to income tax, corporation tax and VAT.  [private_basic] They (our beloved government) have estimated that failure to take reasonable care in record-keeping leads to a loss of around £6.5 billion in tax every year.  Money they clearly want to gather asap.

The checks will be targeted at the self-employed, sole traders (is there a difference??) and businesses with a turnover of less than £50m and less than 250 employees – pretty much 95% of businesses in the country!

So…starting in the 2nd half of 2011, HMRC are intending to “check” 50,000 businesses annually.

The powers given to HMRC under the 2008 Finance Act will allow them to:-

  • impose penalties for significant record-keeping failures
  • bring about an improvement in record keeping across the (estimated) 2 million businesses whose records currently fall below standard
  • increase tax revenues for the Exchequer that they feel diddled out of at the moment
I always thought the Conservatives were supporters of small businesses and were seeking (at election time at least) to reduce the official burden on small business.  Boy – were we had!

There has never been anything but bad things happen when HMRC dig into small business records.  Even the most diligent of business person has been hauled over the coals for such frauds as using copy paper the business bought for private use and ordering the family takeaway pizza on a business phone.

Stupid as these examples are, these are what we have to deal with during in-depth tax investigations when diligent Inspectors can’t fault any aspect of the main business records. It seems that HMRC are not just intent on investigating businesses after their Self Assessment Returns are sent in – but are now seeking to investigate businesses BEFORE a Self Assessment Return is even due.

We are led to believe that these Business Records Checks will take half a day and cost £54.  Who pays that?  Yup – the business being “checked”.  Apparantly HMRC believe that £600 million a year will be raised from these helpful Business Records Checks so they are at least starting this process with an open mind and no preconceptions – Yeah – Right.

Far from making things better for small businesses, this government is so strapped for cash that it is seeking to extract at least a pound and a half of flesh from every business person in the country before they are done.  If you feel that statement is too strong, have another look at the new penalty regime that started this April.  Under this, even an employee who should not even need to submit a Self Assessment Form is ordered to by HMRC but then doesn’t because they have written to HMRC to say they have no need to fill one in, even if they get no reply, will cop a penalty of £900.  Why can we not fine HMRC for incompetance, illegal debt collection, unnecessary harrassment etc of the business community?

Come on David, you know how incompetent the structure of HMRC is at the moment.  You know all the changes going on and staff cutbacks causing errors.  You know any businessperson could run the Treasury a damn site better than politicians – but you still feel paranoid enough to treat every small business as a tax evader and put into effect these ever increasing terror tactics and penalties to screw every last penny out of every citizen, guilty or not.  If you want to get re-elected you had better get things changed because I for one will no longer stand idly by watching my clients get ever more red-tape; ever more deadlines; ever more rules; ever more penalties as the days go on.

I would love to have a go at doing a Business Records Check on HMRC.   I witness on a weekly basis the results of incompetance, carelessness, impossible accents and complete apathy to resolve anything by HMRC staff.  I wonder what penalty I could impose on them!

So, this new bit of hassle, known as the Business Records Check, is just another reason why professional fee insurance is so vital, and why the practice insurers whose policy we insist on clients having is so valuable.  Other policies may cover these checks eventually – but our clients are fully covered from day 1.  You would be surprised how difficult it is to satisfy poorly trained investigative HMRC staff who have no concept of the real world and business, that the records are adequate.

And – So far – we have no idea of what they will deem as acceptable standard.


Ray Stewart
I am a qualified Certified Practising Accountant having passed my final exams way back in 1981. I actually can’t believe that was 37 years ago!! Anyway, I am now in my 60’s and I have been running my own business since May 1983. And before you ask, no, I have never regretted a moment of it! Part of the membership requirements of my professional body now dictate that I spend quite a lot of time on “CPD” - continuing professional education (one of their better ideas) - and over the last two years I decided to study business growth and marketing. I have learnt such a lot and that knowledge has radically changed my old “accountants” approach to business. It has made such a difference to the way I work and operate I feel that I just have to pass on this knowledge. It is simply too powerful to hold back!! - but I will try and do it in simple terms rather than expecting you to spend hours, as I had to, working through the difficult language that trainers seem to use to pass on their concepts. I hope you find the blog a useful resource and interesting place to visit as the months pass. I will do my best to keep up the flow - but if there are any topics you would like me to cover, then please let me know. Ray Stewart
Ray Stewart
Ray Stewart

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