HMRC are now running random spot checks on small businesses in order to ensure that shoddy record-keeping no longer affects underpayment of tax. By keeping yourself organized, a compliance check will be easy.
What is a compliance check?
A note from HM Revenue and Customs:
‘You may have received a letter or telephone call asking for information about your tax or arranging a visit so HM Revenue & Customs (HMRC) can inspect your records.
HMRC now has a standard system for how it carries out compliance checks (also known as inquiries, visits and inspections) across these taxes:
HMRC has one set of powers for these taxes to:
- Visit businesses to inspect premises, assets and records
- Ask taxpayers and third parties for more information and documents
The legislation also provides important safeguards for customers:
- HMRC cannot inspect purely private dwellings without consent
- HMRC must give seven days prior notice of a visit, unless either an unannounced visit is necessary, or a shorter period is agreed
- A new requirement that unannounced visits must be approved beforehand by a specially trained HMRC officer
- A legal requirement for HMRC to act reasonably
HMRC have a different system for checking Excise, information can be found on our Powers to tackle excise fraud are strengthened webpage.
Find more info at HRMC – How We Check Your Tax
3 ways to organize yourself
1. Keep records of all business transactions like:
- A cash book.
- A sales and purchase ledger.
- A wages book
- Invoices and receipts both issued and received.
- Electronic records of sales or till rolls.
- Details of items not rung through the till.
- Details of incidental or miscellaneous income – for example rent for accommodation owned by the business.
- Hire purchase and leasing details.
- An inventory of stock on hand at the end of the accounting year.
- Bank and building society statements, pass books,cheque stubs and paying-in slips which include details of business transactions.
- Details of any money taken out of the business personal use.
- Details of any private money brought into or taken from the business.
- A record of all assets and liabilities must be kept.
- Statements of stock and work in progress and how the figures are calculated e.g. a stock take.
2. File bills and invoices in one place in payment date order. Once a month, go back through the last month and check everything is in order. Do the same with invoice numbers, file them in order and don’t forget to date them!
3. If you have employees, keep any documentation with regards to them together including payroll, payslip and employee contracts.
