| A proposal by HM Revenue
and Customs (HMRC) to start making
large-scale checks of business records
before relevant tax returns are submitted
is misguided, according to the Chartered
Institute of Taxation (CIOT). HMRC is
proposing to use powers in the Finance Act
2008 to check the business records of up
to 50,000 SME businesses annually,
beginning in the second half of 2011, and
to impose penalties for poor record
keeping.
Anthony Thomas, CIOT deputy president,
said the CIOT supported efforts to improve
business record-keeping.
But he added: “We do not believe this
project will meet that objective. Its
purpose seems to be more about raising
money through penalties than about helping
businesses improve their systems.
“HMRC are putting forward a blunt
instrument designed to deliver punishment
when what is needed is a collaborative
process focused on providing education,
guidance and support. We think they need
to revert to the drawing board on this.
“We think that the legal basis for
levying penalties as a result of such a
check prior to submission of a return is
questionable unless there is a failure to
keep any records at all or there has been
a failure to preserve them.
“A penalty should only be levied once
it has been proved that the bookkeeping
records have led to an incorrect return.”
HMRC says that although keeping
adequate and accurate business records
allows businesses to comply properly with
their tax obligations, its random enquiry
programme suggests that poor record
keeping is a problem in around 40 per cent
of around five million SME cases.
With research indicating that poor
business record keeping generally leads to
an underassessment of tax, HMRC estimates
that it could be losing out on tax
payments in up to two million SME cases
each year.
LINK:
Consultation on business record checks |
