March 2, 2011

Business groups criticise HMRC spot checks

by Jan Harris

HMRC’s proposal to carry out spot checks on small businesses, to ensure they are keeping adequate records, has raised alarm among business groups.

HMRC intends to target up to 50,000 small businesses, imposing a fine of up to £3,000 if their records fail to meet minimum reporting standards.

The initiative, which follows the end of HMRC’s Business Records Checks consultation on 28 February, has been labelled a ‘revenue raising exercise’ by the Federation of Small Businesses (FSB).

The FSB want HMRC to issue more information on the scheme, as currently no details are available of the assessment criteria that will be used, or how the businesses to be checked will be selected.

The Institute of Chartered Accountants of Scotland (ICAS) is also critical of the proposal, warning that the costs of the scheme have been substantially underestimated.

According to HMRC each half-day visit will cost a business £54.

However, taking into account business disruption and adviser’s time, ICAS believes that the real cost is nearer £560.

Instead of taking a ‘big-stick’ approach, ICAS wants HMRC to take a more positive approach to helping small businesses keep adequate records.

It wants the first business record check to be on an advisory basis, with penalties only imposed if record keeping does not improve.

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