Posted by on 13 May 2011 | Comments

Tags: HMRC, Small Business

By Paul Bulzacchelli

According to the managing director of Inspired Accountants, HMRC has started to implement a programme of inspections to ensure that small businesses are keeping adequate records.

Paul Bulzacchelli, managing director at Lichfield based Inspired Accountants commented:  “During the consultation process over HMRC’s new approach to record keeping compliance, it was made clear that there will be a direct focus on small business record keeping during the 2011 financial year.”

During a pilot of inspections, HMRC identified that poor records are a key risk to the integrity of the tax system as there are taxpayers who are unable to declare the correct amount of tax because their business records are not adequate. HMRC has estimated that 2 million small to medium size enterprises are keeping inadequate business records.

“This is the first time that HMRC inspectors will be checking records for the current tax year, as in the past it has only targeted companies after analysing a return filed for the previous year.  The inspectors will expect to see that a business is maintaining accurate and adequate records of its invoices, receipts, expenses, VAT, PAYE, national insurance and corporation tax,” added Mr Bulzacchelli.

The inspection process has already commenced with over 1,000 letters being sent out to businesses up and down the country.

Mr Bulzacchelli concluded: “Business owners should take these warnings very seriously as there are potentially serious issues and fines at stake for having poor records and HMRC could decide to go back as far as six years with their inspections.”