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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.

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.

And why don’t you leave a comment, share with your contacts, customers and friends

Oh and of course here is the link for the tool I mentioned above. If you don’t use anything like this, or your current systems are not supporting you, give this a a try. Click Here

I am eternally fascinated by the number of ways we sabotage our financial lives by saying we want or believe in one thing while behaving in a way that is completely opposite to that. Not deliberately, we just fail to see the in-congruency. And then wonder how we messed up in areas that seemed so straight forward.

During a conversation with a contact of mine, who I will call Dave; he mentioned that he was struggling to in his relationship with his business partner. who I will call Greg.

Greg had accused him of being difficult and finding fault with him over minor matters. After chatting to Dave it began to emerge that he felt that Greg was not honest about their relationship. Greg described him as not only a business partner but dear friend, however apart from business matters Greg made little effort to engage with Dave. Dave made Greg godfather to his son and best man at his wedding while Greg had an active social life outside of work that rarely included Dave.

Dave was embarrassed to admit that he was hurt by this and unwittingly Greg’s behaviour had ignited a sense of mistrust in Dave which had been slowly building up into resentment. “How can he call me friend, when I clearly am not?”

One of my favourites, is the “I am doing this for my family” Well what’s wrong with that? you ask. Nothing, it is one of, if not the best reason I can think of for doing anything if you have children. However what if this same person has no will, no life cover, very little savings of their own let alone anything saved for the children, and very common – no pension.

Commonly the reason is not enough funds to live and do all those things, which is perfectly understandable. But dig deeper, when money has been a little easier did they engage the services of a financial advisor, or open a little saving account for little Beth? No they bought a car, because they always wanted a BMW and they have “earned it” If they pop their clogs tomorrow, would little Beth be able to live in the BMW, I think not.

Picture them arguing with their insurance company about an increase in premiums for home contents or business interruption that could prevent them losing all they have worked for or even how they make their living. But happily pay through the nose for the BMW insurance. If the BMW goes missing, painful. If the home or business is burgled or destroyed by fire, devastating!

Despite preaching how important it is to look after the family, the irony is the decisions made do little to make this a reality.

In business, how common it is to prescribe to the dream of building a big successful business. Tut Tut at the irresponsibility of people who do not dot the I’s and cross the T’s; while ignoring the fact that the VAT or Payroll taxes have not been paid for months. Having no money is a very real reason for this but what if they had the money but had to make a choice where to use it.

All too often that choice is not in favour of the tax man.

Apart from wages and rent, pretty much everything else should be lower down the pecking order. Granted, needed staff could walk out, your trade may be severely restricted if you are evicted from your premises, but the tax man uses a very persuasive removal firm called bailiffs. And if that does not satisfy outstanding debts they wind up your company. Was buying that stock because it was a great deal instead worth it?

How we prioritise is what gives us away, but we are all too often the last to see the discrepancy.

Money and figures tell a story.

Over years of building relationships with business owners I have uncovered depression (very common), alcoholism, huge personal debt caused by a strong sense of entitlement because of unresolved neglect issues, to name a few.

I am no trained counselor and my remit is strictly professional, but when people confide in me it is difficult to separate the business issues from the person. All too often the theme seems to be people living lives that are in conflict with who they are and what they really want, frequently to please others or live up to expectations.

Or worse because they have created a life that does not support them, personally and or financially and are at a loss how to change it.

I have a process I call I.C.R.A which I have used for years to get me out of a rut and help keep it that way.

Identify – Where am I now

Clarify – Why is this the case and what needs to change

Rectify – How am I going to fix it

Ask – Find the best people to help you

Nothing new, just my way of remembering, steal it with my blessings.

Have a great day!!

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