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Eric Robinson

Posted by Eric Robinson

Sep 17

How to protect your Business Records from the Taxman

Burton Beavan | How to protect your Business Records from the Taxman

So, I opened up the bin bag and wondered – how could anyone make sense of a jumble that consisted of cheque book stubs, paying in books and miscellaneous bits of paper that would have looked more at home on the floor of a hamster cage than under scrutiny on the desk of an Inspector of Taxes.

That was four years ago, but the experience repeats itself even though I have moved to the other side of the taxation divide. It’s not part of a flash back induced by the trauma of years at HMRC but certainly smacks of déjà vu.  Apart from the wonder and awe that I feel for those who can make sense of the disembodied collection of material that are referred to as “business records” I feel duty bound to question how any successful business can function in such a state of chaos.

Fortunately, the majority of businesses across the country have no issues with the standard of record keeping that satisfies both their business own requirements and, importantly, complies with what the “Taxman” might expect.  But still many businesses “out there” fail to understand just how important good records are.

PLEASE LET ME BE CLEAR – POOR AND DISORGANISED BUSINESS RECORDS MEAN COST AND TROUBLE.

“Keeping documentation adequate for the purpose of recording the state of anyone’s business is a fundamental part of business”, this was my bog standard response to claims made by many proprietors who claimed that they were all too busy in the “hands-on” running of the business to spend much time at all keeping records.  My tone then was stern and reproachful.  That is what you expect an Inspector of Taxes to say – and that is how he or she would say it.  Now, as a reformed character, I still convey that very same message but in a cheery, positive, yet cautionary manner in the hope that if tested, the business records will stand muster.

HMRC have targeted poor record keeping as a prime cause of a loss of revenue to the Treasury.  The business record checks that were introduced in the recent past and then suspended, and then resurrected again, confirm that in a significant number of cases business records were so poor that tax was being lost.  Some might view the suspension of the checks as an opportunity for HMRC to organise the penalty regime necessary to address non-compliance in record keeping standards.  What they have said themselves is that for the period to 4th January 2012, 2,437 business records checks had been carried out.  These found that 39% of businesses had some issue with their record-keeping.  This comprised of 28% having some issue with their record-keeping and 11% having issues serious enough to warrant a follow up visit.  Clearly not good news for cash businesses that write their records up on the back of a fag packet at the year end!!!

If an Inspector says that your records are “not robust enough” then you know that a great deal of time and effort is going to be needed to satisfy HMRC that the return they support is correct.

What is clear is that the new approach, when it comes will not be “an arm round the shoulder” and reassuring words of encouragement – especially if a business has already been visited by HMRC and warned of the need to improve its records!

So is it all doom and gloom?

Well, no – in fact not at all.  It is a question of perspective.  The important thing to remember is that the records are kept primarily for you and your benefit and not necessarily to slavishly meet the demands of those who hold the country’s purse strings – although the benefits to you in this respect are obvious.

  • Good business records are not difficult to keep and maintain
  • Good business records support the business
  • The manner in which the records are kept can be flexible to suit the needs of the business and the person maintaining them
  • Records written up on a frequent and regular basis are far better than the dreaded job done without enthusiasm at the month end
  • Business records should always be supported by corroborative documentation

HMRC have a number of sections on their site which are useful reads:-

http://www.hmrc.gov.uk/startingup/keeprecs.htm
Keeping Records: A quick guide

http://www.hmrc.gov.uk/sa/rk-bk1.pdf
A general guide to keeping Records

http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm
Keeping records if you are self employed

http://www.hmrc.gov.uk/sa/rec-keep-part-partners.htm
Keeping records for partners and partnerships

http://www.hmrc.gov.uk/vat/managing/returns-accounts/accounts.htm
Accounts and records for your VAT

http://www.hmrc.gov.uk/ct/managing/record-keeping.htm
Records to keep for Corporation Tax

http://www.hmrc.gov.uk/startingup/working-yourself.pdf
Giving your business the best start with tax

………….and if you prefer video instruction then please try these:-

http://www.youtube.com/watch?v=1SaWkRYW2yM&feature=relmfu
HMRC: Record Keeping Guide

http://www.youtube.com/watch?v=GrL4z1Ild4k&feature=relmfu
HMRC: Motoring expenses

If you have any lingering doubts, questions or need reassurance and advice then we are only a telephone call or click away.

Above all else – if in doubt ASK!!!!!!!!

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