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Expert warns beefed-up tax watchdog will be looking for quick and easy wins among small businesses with inadequate records while failure to take reasonable care as serious as evasion.
IFAs who balance their books in-house are more likely to face a HM Revenue and Customs (HMRC) swoop, according to a leading tax expert.
George Bull, senior tax partner at accountants Baker Tilly, said HMRC inspectors would be looking for “quick wins” when the Business Record Checks (BRC) scheme - designed to target small businesses - is rolled out this year.
“When we talk about events that provoke extreme emotional stress, we tend to think of bereavement or job loss. I would add a HMRC inspection to that list,” he said.
“In most cases where small businesses are penalised, it is because there is no dedicated bookkeeper.”
HMRC was planning 50,000 inspections per year as part of the scheme, but last week announced it would be nearer 20,000.
Bull said that 120 inspectors working in pairs for 220 days per year would have to make 1.5 visits per day - and would be looking for easy targets as a result.
He also warned advisers that HMRC would treat failure to take reasonable care as seriously as tax evasion and criminality.
“HMRC’s justification for the scheme is that the amount of the tax gap made up by small businesses failing to take reasonable care of their accounts is £4bn - the same as evasion and the hidden economy,” he said.
“The latter two may come across worse in the public perception, but for HMRC it is the amount that counts.”
In a trial run of the scheme, outlined in a consultation document published in December, HMRC found 44% of small businesses had some problems with their record keeping, with 12% having ‘seriously inadequate records’.
Firms which fail to meet HMRC’s measure of ‘adequate’ - which Bull defines as not recording receipts or writing up records infrequently - could face a fine of up to £3,000.
>> For further information
To view the HMRC consultation go to: http://tinyurl.com/2v727n7
HMRC: Remember paper tax return deadlineAdvisers filing a self-assessment paper tax return after the 31 October deadline will be hit with a £100 fine – even if there is no tax to pay, or the tax due is paid on time. HM Revenue and Customs (HMRC) also highlighted a series of further late-filing penalties at three, six and twelve months, which could reach £1,600 if left unpaid. Its guidelines recommend filing online, which extends the deadline to 31 January. Benefits include automatic tax calculation; immediate online confirmation; and faster processing, so any money owed is repaid more quickly. However, advisers who intend to submit a paper form, miss the deadline and file online instead will still be fined. HMRC’s website offers a number of pages of advice on how to register and complete a tax return. www.hmrc.gov.uk/ |
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Scaremongering
The stats above relate to small businesses as a whole. That includes window cleaners, tree surgeons, mobile mechanics. I suspect IFA's have better records than most small businesses because we need them for GABRIEL. There's enough out there to worry about without IFA Online making mountains out of molehills. If your worried join the Federation of Small Businesses. They include insurance for tax investigations in their membership.
Posted by: Tom Scott
Not entirely correct
I agree wholeheartedly with the comments of David & Tom Scott. Information in the box re filing dates is not entirely correct. If a Self Assessment Return is filed online by 31 January there is no penalty. It is utterly irrelevant whether you were planning to file a paper return and how would HMRC know this anyway. Just because they have issued a paper return does NOT mean that you have to file a paper return.
Posted by: Richard
Deadline trap
Just to continue with Richard's point: If, however, you do file a paper return and then realise it won't or may not arrive in time you can't "undo" your error and file on-line (even if you do it immediately so as to arrive before snail mail; you'll still cop a £100 penalty even if there is no tax to pay! TCF anybody?
Posted by: David
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Over egged?
HMRC certainly are rolling ou their BRC's more generally but what penalty will they be able to apply and. cruciall, make stick. Statutory rquirements are that tax payers are required to make a correct return and pay the correct amount of tax by the stipulated dates. There are NO stipulated methods by which records must be kept and HMRC has not in any (to my knowledge) way established what they "regard" as adequate. There is considerable doubt and debate amongst the accounting proffession as to the legality of HMRC's plans to levy penalty charges for such deficiencies. HMRC might like to think they are the masters of the universe but they are not.
Posted by: David