News | September 2024 | Keep Your Business Records in Order to Avoid HMRC Fines

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September 2024 | Keep Your Business Records in Order to Avoid HMRC Fines

Maintaining accurate business records is not only crucial for running a successful business but also a legal obligation for HMRC. Businesses and individuals must keep records of their income and expenses for at least six years to stay compliant.

If HMRC launches an investigation into your tax affairs and your records are incomplete, you may face fines. To avoid penalties, it's essential to ensure your records are well-organised and up to date.

WHAT INFORMATION ARE WE SUPPOSED TO HOLD?

You need to hold various information, such as all the income and expenses you include on your tax return, receipts and invoices, and payroll records - if you have them - to verify the money and perks you have given your employees.

If you or your business is VAT registered - which is a requirement in the UK if you or your business has a turnover of more than £90,000 per year - then you will also need to keep the records of what you have put on VAT returns throughout the year.

In addition, you would need to keep a copy of other documents that support your financial transactions within your business, which includes things like your bank statements.

WHY DO YOU NEED TO KEEP THESE RECORDS?

Holding these records will allow HMRC to review all the information you have put into your self-assessment or your company to check you have declared everything that should have been declared. But it also enables you to defend any investigations undertaken by HMRC if it believes you have tried to avoid paying tax.

You could receive a visit at any time from HMRC, whether you're a business or an individual, and you would be expected to have your records up-to-date and available for inspection. But you will get notice in advance of a visit, and if you have an accountant then he or she will be contacted instead.

HMRC may ask to visit your home or business premises, or it can visit your adviser's office if that is more appropriate. If you have a visit at your home or business from HMRC, your accountant or legal adviser can be present if you prefer. If you get a notification that the tax office wants to visit you, you may face a penalty if you refuse the visit or you don't send information back.

There are some exemptions where a penalty wouldn't be applied for refusing the visit, such as if you're seriously ill or someone close to you has died. You can also ask HMRC to stop the check if you want to, but you will need to give them the reasons why if you don't agree with it. You can also apply for alternative dispute resolution (ADR) at any time if you do not agree with HMRC's decision or what is being checked.

You will be sent details of the results of the check by letter and if you have paid too much tax, this will be repaid, or if you have not paid enough tax, you will have to pay any underpaid tax within 30 days. Usually, you will have to pay interest on top from the date the tax was due. If you haven't paid enough tax, you may also have to pay a penalty, but HMRC will consider how helpful you have been during the investigation. But if you disagree with HMRC, you can appeal a tax decision.

WE CAN HELP YOU

If you get a notification from HMRC that you are going to receive a visit and you need our assistance to deal with this, then please get in touch with us on 01709 327 215 or via email at info@branagans.co.uk.