What exactly is Business Record checking and how could it affect your business.
Please bear in mind that regulations and procedures change at the Revenue all the time, so the information here may change.
This video is for the people who should read their Tax and Government bulletins, but get a migraine just looking at them.
And for those of you that want to take action before action is taken against you. See below for a great tool to have in your business.
[youtube]http://youtu.be/OWMYvdLJqtA[/youtube]
Please bear in mind that regulations and procedures change at the Revenue all the time, so the information here may change.
Well the Revenue introduced the record checking in 2011 as a way of ensuring that small to medium sized business owners are keeping adequate records to support any returns they make, such as their tax returns. They already do these for VAT.
So what is different about these checks?
Well in the past when you were contacted by the revenue to arrange a visit to inspect your records it was usually triggered by something. For example if your VAT Return said you were entitled to a refund, the Revenue could request an inspection to verify your figures.
Business record checking however is based on businesses the Revenue think may be more risky than others, and so target – for want of a better word – those. Prime examples are heavily cash-based businesses, particularly the trades, consultants, restaurants and take-aways, to name a few.
A pilot was run in 2011 which brought up some concerns from industry experts, so the Revenue suspended the checks until late 2012 when they resumed them again. For those hoping it may fade away. During the pilot scheme the Revenue found issues with 36% of business owners visited and reported that of those 10% were serious enough to warrant a further visit. So they will not be going away any time soon.
How does it work and what happens?
FIRSTLY
- HMRC contact you, usually in writing, to arrange a time to ask you questions over the telephone about your bookkeeping records. This interview is usually around 15 minutes
- Based on the call the officer will come to one of three conclusions:
1) No further action is required
2) You could do with further guidance, so your details will be passed to their Education & Support Team to provide you with help on tidying up your records.
Or
3) They are sufficiently concerned that your records are at risk of being inadequate and you require a visit from an inspector.
Your details are then passed to their booking team to arrange a convenient time for this.
You will be told during the call which one of these actions applies to you.
What if you are told you need a visit?
THE VISIT
The face to face inspections are usually around two hours, but I have had this estimated with visits in the past and it is not unheard of for an officer to be at a premises for many hours if they find enough cause to keep looking.
The officer will:
- Ask you about your business and how it is run
- Take a look how you do your bookkeeping in general
- Inspect a period of bookkeeping, around months to get a snapshot of actual records
From this they will make conclusions and decide whether further action is needed, and if so what that needs to be.
As with the introductory phone call you will be told during the visit what the next stage is, if any, and this is confirmed in writing.
What are the next stages?
OUTCOMES
- If all is well, that is the end of it and this is confirmed by letter
- If there is room for improvement you will be told what needs to be dealt with to bring your records up to scratch and given a deadline in which to do it, generally no more than 3 months. You may also be liable to pay a record keeping penalty.
- At the end of the deadline you get a follow up visit. If you have done as asked as your records pass scrutiny; your penalty will be removed and you no longer have to pay it.
- However if the officer still is not satisfied you can be fined anything between £250 and £3000, the higher penalty applies if you have destroyed records that you should still have.
- You are then put on the schedule for another visit in two years time.
- As if that is not enough, you may also be referred to the tax return investigation team to carry out their own checks because the lack of good records is a red flag that the Returns need looking at also.
- And they will also check whether you should be registered for VAT, PAYE and CIS if you have not already done so.
If this is daunting to you, speak to your advisers to make sure you are where you should be. Your accountant, if they are involved in your day to day. But this is really the forte of your trusty bookkeeper.
Thank you for spending time at the financial gym. Dedicated to helping you be the financial leader in your business without having to be a financial expert.
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