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Contractor accountants may see more of their clients’ records checked

Contractor accountants may see more of their clients’ records checked

Earlier this year, HMRC began a pilot scheme to check the business records of small businesses.

800 SMEs, in eight areas, were included in the test and the Revenue discovered that 44% had issues with record-keeping. The pilot also discovered that 12% of the businesses it visited kept seriously inadequate book-keeping records.

HMRC has now said that it intends to step up the scheme and complete as many as 12,000 checks before the end of this financial year in April 2012. In the year 2012-13, it will carry out the checks on 20,000 small businesses.

To begin with, only firms that have kept extremely poor records be fined, but over the longer term serious inadequacies could lead to penalties of up to £3,000.

Richard Summersgill, the director of local compliance at HMRC, explained that good record-keeping enables companies to pay the correct amount of tax when it becomes due and SMEs that comply will avoid interest and penalty charges.

The Revenue says the new checks are designed to support businesses and reduce the tax gap but the CIoT is seriously concerned that the programme is to be extended.

Anthony Thomas, the president of the Institute, said it was questionable whether the Revenue has the power to penalise companies before tax returns are sent in. He went on to say that there could be misunderstandings over what constitutes adequate records rather than incomplete ones.

Thomas cited as an example the Powers team at the Revenue saying that a shoebox full of receipts and invoices was adequate in-year but the compliance team saying that unless they were listed, it was a case of inadequate record-keeping.

John Cassidy from PKF said that HMRC should focus its activities on areas that bring in an immediate cash return such as PAYE. The Revenues records show that errors and underpayments of PAYE have increased and yet compliance checks have virtually stopped.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: The Nose by lamcopphis

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