Tax teams root out businesses failing to keep good records

AFS Team·6 October 2011·3 min read
Tax teams root out businesses failing to keep good records
The tax man is looking at more cash business like letting property in a bid to claw back unpaid tax. After a pilot inquiry checking out business records in eight trial areas, almost half (44 per cent) of the sole traders, partnerships and firms visited were found to have record-keeping issues - while 12 per cent had seriously inadequate records. Now, HM Revenue and Customs investigators are stepping up their inquiries across the UK to trap more businesses that fail to monitor their finances. HMRC is scheduled to carry out 12,000 more business record checks by the end of March, with at least 20,000 in the pipeline for the next tax year. Inquiry teams are due to be bolstered by more recruits to swell their numbers from just 30 investigators to 120. Businesses can expect more inspectors to call in the new year as HMRC rolls out the scheme nationwide. HMRC's Director of Local Compliance, Richard Summersgill, said: "Good record-keeping helps businesses pay the right amount of tax at the right time, thereby potentially avoiding interest and penalties. "Adequate records give businesses a clear idea of their trading position and profitability, allowing them to make business decisions and adjustments to ensure survival and success. Where a check has shown a business keeps adequate records, it gives HMRC a greater degree of assurance as to the likely accuracy of its tax returns. "Ultimately, this is about supporting businesses and reducing the tax gap." Business inspections are a tax regulation milestone. Previously, HMRC had to wait for a taxpayer to file a return before investigating the underlying paperwork, but new tax laws let them investigate suspected tax evaders to see if they are failing to declare their income before submitting a tax return. Businesses not keeping adequate records can also expect fines of up to £3,000. The inspections also fill a gap in tax compliance. Business running PAYE schemes or registered for VAT are already regularly inspected but those falling outside of these schemes rarely faces any inquiry.