Partner Article

SMEs should set the records straight

John Richards, head of the Specialist Tax division at north east accountants and business advisors RMT, shares his expertise.

If you own or manage a small business, the recommencement of an HM Revenue & Customs campaign that focuses on the standards to which firms manage their business and financial information should be a clear call to action if you want to avoid the risk of an unwanted visit from the taxman.

HMRC’s Business Records Check (BRC) programme reviews the adequacy of SMEs’ business record keeping, and was put on hold earlier this yeardue to concerns expressed across the finance industry about its fitness for purpose.

It has now been revised and relaunched by HMRC, and will see the Revenue writing to those SMEs who are more likely to be at risk of having inadequate records and asking them to take part in the scheme.

Telephone interviews will then be conducted with company managers about their business record keeping, and HMRC will use the responses they receive to assess whether a face-to-face BRC visit is required.

If a company’s business records are deemed to require improvement, an officer from HMRC’s Business Education and Support Team will work with the SME - and if they are deemed to be inadequate, a face-to-face visit will be arranged to agree what needs to be done to correct the situation. Fines of up to £3,000 are available to be imposed on those businesses that don’t come up to scratch.

And these firms could also subsequently face even greater problems, with any failing to pass the test likely to see enquiries opened into the accounts and tax returns for which their questionable records form a basis.

HMRC has been tasked by the Government with maximising the amount of revenue it raises, as it look to increase the tax contribution to the UK’s under pressure public finances.

They are getting increasingly efficient at squeezing the last drop of tax and associated income out of their ‘customers,’ as we are all now known, and this latest campaign has the potential to bring even more money in if businesses aren’t fully prepared for an inspector’s visit.

Everyone knows that many business people have been running to standstill over the last few years in a economic climate that is still very challenging, but this is one of those situations where taking the time to do a proper job now saves a lot more time, not to mention a great deal of anguish, in the future.

The amount of time and money that carelessness could cost businesses inthe long term if their records aren’t up to scratch is a real sting in the tail, especially when they could be avoided with a bit of thought and a logical approach to the task in hand.

Whether HMRC calls is clearly beyond your control, but being ready forthem if they do is not, and companies can take a number of steps to makesure they’re as ready as they can be.

Anything from unexplained or unrecorded receipts and payments, through to missing invoices, payments to casual employees or personal expenditure within business records could catch the eye of the inspector, and there’s no reason why they can’t be addressed with the right approach and attention to detail.

All SMEs would be well advised to take a careful look at their recordkeeping to make sure that it is accurate, complete and up to date, and given that they deal with them on a regular basis, to get the professional opinion of their accountant on the records.

This was posted in Bdaily's Members' News section by RMT Accountants & Business Advisors .