Taxman to target local firms with spot-checks
4 April 2011
Firms in and around Southampton are to face spot-checks on their tax records – with penalties of up to £3,000 for the tardy.
HM Revenue and Customs believes that around 4 in 10, or some two million small and medium enterprises in the UK, keep inadequate tax records.
Trevor Hayman, a tax expert at the south coast office of accountancy group Smith & Williamson, warned: “The spot-check programme will apply to both new and established businesses and so it will be of concern to thousands of businesses in the South, and they should take these warnings seriously.
“Her Majesty’s Revenue and Customs will literally be able to walk into any business locally and demand to see their invoices, receipts, PAYE, cheque stubbs, till rolls, bank and credit cards statements, corporation tax and VAT records and so on.
“And remember, they can go back six years in the case of a business that has been around that long.
“If they don’t keep good records, they may be unable to substantiate tax returns and so would have difficulty in proving their figures are correct, should HMRC take issue with them.”
The taxman will launch a programme of spot checks later this year - it has not said when - to make sure businesses are applying the rules for keeping “accurate and adequate” business records.
Trevor, based in Southampton, said: “This approach marks a change, and a hardening attitude.
“Currently, the tax authorities typically scrutinise an organisation’s tax affairs and record keeping if they believe it has filed an inaccurate tax return and is therefore paying too little tax.
“But this new programme means inspectors will be able to focus on current year records before a tax return is even submitted. If in doubt, seek professional advice from tax experts.”
To encourage people to get their records in order, HMRC has issued a range of advisory information which is available at www.hmrc.gov.uk
As a basic minimum, business people need to be organised and methodical in their record keeping.
Top tips from Smith & Williamson include:
Time: keep records going back at least six years;
What to keep: invoices, bank statements, paying-in books, details of purchases, expense details and so on;
Personal vs. business: anyone who makes a claim for the use of assets which they use personally as well as for the business - a car being a typical example - must be scrupulous in allocating personal and business usage and have the necessary supporting paperwork to back up their claim;
Be regular: keep on top of your expenses and record keeping. This will make it easier and more accurate. Also, HMRC is more likely to believe contemporaneous records;
Avoid estimates: if you have to estimate an amount, make sure you can provide suitable evidence.
Image shows: Trevor Hayman
Image copyright: Deep South Media
For further information:
Contact: Ron Wain (Deep South Media)
Mobile: 07824 355523
Office: 01202 534487
E-mail:ron.wain@deepsouthmedia.co.uk
Website:www.deepsouthmedia.co.uk
