This is a question that rears its head from time to time here in the office. My initial reaction is “Why not?”.
Occasionally there is a reasonable reason for the lack of evidence of someone’s business activities. It may be that the business has grown really quickly and they haven’t been able to keep up. They may have only just started the business and don’t know the first thing about bookkeeping and are seeking help. Sometimes there has been a known disaster such as a major flood or a fire. However, sometimes a person thinks they are being clever in deliberately not keeping records so they pay little or no tax.
My reaction to this question will completely depend upon the circumstances as to why a business owner has no records. If it is genuine, I will move heaven and earth to help them reconstruct whatever is missing or destroyed and will then stand with them, side by side during a tax investigation, if necessary, to explain what and how we have done the reconstruction.
I will never act for a client who chooses not to keep adequate records of their business activities. I deal with HM Revenue & Customs all the time and I will never put my professional reputation on the line for any shady character. Unfortunately, there are accountants who will deal with these people and if they get away with it for a few years before HMRC catch up with them they broadcast their cleverness all around the area. This can make genuine, honest people doubt that what they are doing is right if this character gets away with it. The flip side is that they are always found out. It may take 1 year or 20 years, but they will be called to account eventually. With all the resources of HMRC and the bounty offered to anyone who shops these characters, they never get away with it.
Ignorance of the law has never been an excuse for lack of records. Anyone in business knows they may have to pay tax and should inform the authorities when they start their business. These days there is an unprecedented level of help, information, advice, packages, coaches, accountants, bookkeepers, marketers and consultants both paid and free for the new and established business owner alike.
So… if in doubt about any aspect of business or the requirement for keeping records – ask!!