HMRC is concerned that many small businesses do not keep adequate records to support the entries on their tax returns, so they have launched a campaign to encourage better record keeping. However, more serious interventions are expected over the next year.
We know from a consultation paper released in December 2010 that HMRC is planning to write to around 50 000 small businesses advising that they may be subject to a detailed records check. If a business is visited and it’s records are found to be inadequate, then that business may be liable to a penalty of £3 000. This penalty cannot be suspended even if the taxpayer promises to keep better records in future.
Now is a good time to ensure that records are kept up to date and can support tax returns.