The taxman is planning to investigate around 50,000 small businesses
over the course of next year for failing to maintain proper records
and underpaying corporation tax.
HM Revenue & Customs (HMRC) have warned small businesses that they
could face expensive consequences in the new year if they fail to keep
their financial records in order.
The HMRC are planning to clamp-down upon poor book-keeping and tax
underpayments over 2011.
The group plans to utilise it’s Business Records Checks campaign to
target the 40% of small businesses that suffer from poor record keeping
and least likely to pay their taxes.
More than 2 million small firms that keep their financial records in poor
order will be faced with investigations and fines in excess of £3,000.
The National Tax Director with accountancy firm, Smith & Williamson, Richard Mannion, commented:
“One of the difficulties facing entrepreneurs and SMEs is that they may have to keep records for income tax, VAT, capital gains tax, PAYE and so on. Separate penalties apply for each set of taxes so a small business can fall foul of the results in several areas.”
Mr Mannion went on to say:
“In my experience some inspectors expect entrepreneurs and other business people to keep a set of books and records in textbook order. Some inspectors have little understanding of what life is like in the real business world where an entrepreneur or sole trader is responsible for production, sales, marketing, health and safety, etc, in addition to book-keeping and acting as unpaid PAYE and VAT collector.”
The HMRC believes that there are major benefits from improved record keeping, including an improved chance of business success, better financial management and a lessened chance of a compliance intervention, such as a full inquiry into the firm’s tax returns.