Swindon businesses could face fines of up to £3,000 under a new HM Revenue & Customs (HMRC) crackdown if they do not have up-to-date records
The warning comes from Paul Morris, tax planning director at Target Chartered Accountants, who points out that 50,000 small and medium-sized enterprises (SMEs) will be targeted annually. The new business record checks, due to start in July, could raise £600m over the next four years.
“HMRC has the power to inspect business records at any time and for any reason,” said Paul. “However, until now these kinds of random checks have been rare.
“HMRC statistics show that 40 per cent of SMEs have poor tax records – this means that two in every five could be at risk of one off these checks sometime in the future.”
He added that a new electronic format for filing corporation tax returns and financial statements online called iXBRL will be launched this year.
“The official line is that this will improve efficiency, but it will also enhance HMRC’s ability to identify areas of potential query significantly,” said Paul. “The likely result is that the upward trend in business record checks and other HMRC inquiries will continue further.”
The majority of the £600m revenue HMRC expects to raise will be from penalties, according to Paul.
“The checks, which will assess the accuracy and adequacy of records, will be backed up by a tariff-based penalty regime for failure to keep proper records,” he said.
“While it is likely that some of these checks will be made by phone or letter, HMRC are launching a new record check process which could include making onsite visits to business premises.
“These can be made at any time, with only seven days notice.
“Aside from the loss in business time, these types of inquiries can be very intrusive and stressful even if business records are found to be in order.”
HMRC’s drive to raise extra revenue also includes increasing the number of tax investigations by 3,000% this year to raise an extra £7bn a year.
“It is good practice for businesses to insure themselves against the threat of HMRC checks and inquiries. A good fee protection policy covers all the professional costs for dealing with most HMRC inquiries so it is good peace of mind to have,” Paul added.
