FPB warns proper book keeping essential to avoid £3,000 fine
The Forum of Private Business (FPB) is warning small firms to keep proper financial records or face fines in excess of £3,000.
Despite recently promising a 'light touch' approach to mistakes made in the process of implementing the 2.5 per cent VAT rise, the FPB claims that HMRC is planning to clamp down on firms for what the tax authority calls 'significant record keeping failures', as well as probing likely unpaid taxes.
Firms are expected to keep records going back at least six years. Information including invoices, bank statements, receipts and cheque stubs will have to be supported by up-to-date accounts books and detailed analysis.
The Forum's Accountancy Adviser, Matt Holmes, managing director of Liquid Accounts , warned: 'HMRC is planning to clamp down on small businesses tax payments and record keeping from the middle of 2011. But it is important that firms act now to get their houses in order - for many this will represent a lengthy administrative headache.'
Writing in the Forum's member newsletter, Mr Holmes' three top tips to business owners for better book-keeping - and avoiding a hefty fine - are:
Seek advice - if you are struggling for time or don't have the expertise make use of freelance bookkeepers or virtual assistants. There will be a cost involved but you will be buying peace of mind and precious time to concentrate on making money for your business.
Embrace mobile technologies - there are smart phones and numerous apps to enable you to keep on top of your finances, including one that allows you to photograph and record expense receipts.
Consider new, cost-effective online accounting packages that allow you to store and analyse much more information compared to older desktop programmes and manual filing systems.
In 2008, HMRC launched its Business Payment Support scheme, which has recently been extended for the duration of the present Parliament. Popularly known as 'Time to Pay', the scheme allows struggling businesses to defer tax payments.
However, recently business owners have expressed concerns that HMRC is taking a harder line despite the fact that they are willing - but unable - to pay.
The FPB is also calling for a major root-and-branch simplification of the tax system to make it easier for small businesses to negotiate their tax responsibilities and it has urged the Government's probe into tax avoidance to address a VAT loophole where large companies are able to relocate to the Channel Islands in order to avoid paying VAT, distorting competition with smaller firms and amounting to tax abuse.
13 January 2011