HMRC believes 40% of the five million small and medium businesses in the UK maintain inadequate records.
Due to commence in the second half of 2011, the HMRC are introducing a new Business Records Check consisting of a visit to the business premises by at least one officer for approximately four hours. Where the officer identifies significant record keeping failures it is likely that a penalty will be imposed. The current maximum penaltiy for incorrect record keeping is £3,000. Failures in record keeping are likely to lead to a tax investigation to quantify any tax underpayment.
So are your records good enough to pass a ‘check’?
HMRC has suggested that for records to be sufficient there must be (a) a clear record of all business monies in and out and (b) the records must allow an accurate interpretation to be made as to the nature of the receipts and expenditure.
If you have any doubt as to the quality of your record keeping or you have been putting off sorting through that mass of papers now is the time to review and reorganise.