HM Revenue and Customs (HMRC) has launched a crackdown on poor record-keeping among smaller businesses.
HMRC hopes the crackdown will bring in an additional £600 million over the next four years, both through fines and the rise in tax paid by business owners keeping better records as a result.
Although it acknowledges that most businesses will not receive a visit from inspectors, HMRC hopes the fact that it is launching the crackdown will prompt business owners who have not already done so to get their affairs in order.
Ideally, businesses should have tax records going back at least six years and keep invoices, bank statements, paying-in books and details of purchases and expenses.
The taxman has already started writing to more than 1,000 business owners warning them that they will be receiving visits from tax inspectors in the next few months. HMRC is calling this initial period a “test and learn” phase, which will precede a full programme of spot checks on businesses across the country.
Estimates from HMRC suggest that around four in 10, or around two million SMEs, do not keep adequate tax records.
Businesses who fail to meet the required standards could face fines of up to £3,000, although HMRC has advised that this will only happen in exceptional circumstances in the first phase of investigations.
We are very fortunate at thebestof to have 3 great local accountancy firms who can help you keep your financial affairs in order – find out more by following the link to the Accountants page here.