"This approach marks a change and hardening attitude. Currently, the tax authorities typically scrutinise an organisation's tax affairs and record keeping if they believe it has filed an inaccurate tax return and is therefore paying too little tax. But this new programme means inspectors will be able to focus on current year records before a tax return is even submitted," said Richard Mannion, national tax director at Smith & Williamson, the accountancy and financial services group.
He continued: "HMRC will literally be able to walk into any business and demand to see their invoices, receipts, PAYE and VAT records and so on. And remember, they can go back six years in the case of a business that has been around that long."
"The programme will apply to both new and established businesses and so it will be of concern to millions of businesses up and down the country."
To encourage people to get their records in order, HMRC has issued a range of advisory information which is available at www.hmrc.gov.uk
"Business owners should take these warnings seriously. If they don't keep good records, they may be unable to substantiate tax returns and so would have difficulty in proving their figures are correct, should HMRC take issue with them."
As a basic minimum, business people need to be organised and methodical in their record keeping.
Top five tips include:
- Time: keep records going back at least six years.
- What to keep: invoices, bank statements, paying in books, details of purchases, expense details and so on.
- Personal vs. business: anyone who makes a claim for the use of assets which they use personally as well as for the business - a car being a typical example - must be scrupulous in allocating personal and business useage and have the necessary supporting paperwork to back up their claim.
- Be regular: keep on top of your expenses and record keeping. This will make it easier and more accurate. Also, HMRC is more likely to believe contemporaneous records.
- Avoid estimates: if you have to estimate an amount, make sure you can provide suitable evidence.
Richard Mannion, national tax director at Smith & Williamson, the accountancy and financial services group
Tel: 020 7131 4252 / 07799 761 326
Email: Richard Mannion
PR enquiries to:
Kate Harrison 020 7131 4228
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Note to editors
Smith & Williamson is an independent professional and financial services group employing around 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Salisbury, Southampton and Worcester.
Smith & Williamson Limited
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.