Small businesses need to manage finances effectivelyDec 31, 2010 // Christian Reynolds
Small businesses in the UK could face costly consequences in the New Year if they fail to keep their financial records in order, according to HM Revenue & Customs.
HM Revenue & Customs (HMRC) are planning to clampdown on inaccurate bookkeeping and tax underpayments among small businesses in 2011.
The agency plans to use its ‘Business Records Checks’ campaign to target the 40% of small businesses that suffered from poor record keeping and most likely to not pay their taxes.
Over two million small businesses that keep records in poor condition/order will face investigation and fines of up to £3,000.
Inspectors have little understanding of what it is like in the business world, therefore will not be lenient and fully expect records to be kept in text book order.
Richard Mannion, national tax director at accountants Smith & Williamson said:
“One of the difficulties facing entrepreneurs and SMEs is that they may have to keep records for income tax, VAT, capital gains tax, PAYE and so on. Separate penalties apply for each set of taxes so a small business can fall foul of the results in several areas.”
HMRC also claims that there are benefits from better record keeping including “improved chances of business success”, “improved financial management” and a “reduced likelihood of a subsequent compliance intervention, such as a full inquiry into their returns”.