How will HMRC's Business Records Checks affect my business?

HMRC’s Business Records Checks

HMRC has recently published a consultation document, detailing its intention to carry out a programme of Business Records Checks that will review both the adequacy and accuracy of business records within the SME sector. Such Checks are due to commence in the second half of 2011, and will affect 50,000 businesses per annum.

Whilst the need to keep proper business records to comply with tax obligations is widely acknowledged, HMRC’s initial enquiries have indicated that around 40% of all SMEs (circa 5 million) do not keep appropriate records, leading to an underassessment of tax in up to 2 million SME cases annually.

Whilst current legislation provides that those SMEs failing to comply with their record keeping obligations are liable to a penalty ‘not exceeding’ £3,000, HMRC policy has historically erred on the side of imposing this penalty only in the most serious of cases. However, new information powers introduced in 2008 have given HMRC much greater access to business records, allowing far more invasive scrutiny than has been previously available. It is believed that, if implemented, this programme of Checks could raise an extra £600m in penalties over the next four years.

HMRC have suggested that these Checks will bring three key benefits to business customers, namely: a reduced likelihood of a subsequent compliance intervention; improved financial management; and an opportunity to ask questions and seek clarity about record keeping obligations.

What Can My Business Do To Prepare For These Checks?

To find out more about the Business Records Checks, download HMRC’s consultation document.

To ascertain your compliance with record keeping obligations, download HMRC’s fact sheet – ‘Keeping Records for Business – What you Need to Know’.

For further information, or general record keeping advice, contact Recordsmanagement’s records’ management advisors on 023 8069 5555 or enquiries@filestore.co.uk.