The “Business Records Checks” campaign will target around 40 per cent of all 4.9m small and medium sized businesses that HMRC has said that are guilty of poor record keeping and where unpaid tax is likely to be due.
HMRC said it will use its existing powers to tackle 50,000 of the worst cases each year from the second half of 2011. Penalties would be imposed “for significant record keeping failures,” it said.
HMRC said there was “customer benefits” from better record keeping, including “improved chances of business success”, “improved financial management” and a “reduced likelihood of a subsequent compliance intervention, such as a full inquiry into their returns”.
It has also said it has no “precise” definition of unsatisfactory book-keeping. However, it gave the following examples for inspectors:
- Untidy and unanalysed records such as a box full of invoices, bank statements, cheque stubs and so on, not supported by an analysis book such as ‘Simplex’
- Analysis books not completed regularly – a system whereby the books are written up more than four weeks after the event is not as reliable as books completed contemporaneously
- Cash books not written up in date order indicating that the books may have been written up from the bank statements
- Significant unanalysed and un-vouched round sums.
Businesses are legally required to keep records going back at least six years. For tax purposes, this includes invoices, bank statements, paying in books, details of purchases and expenses.
In addition to these anyone who makes a claim for the use of assets which they use personally as well as for the business – a computer being a typical example – must be scrupulous in allocating personal and business usage and have the necessary supporting paperwork to back up their claim.”