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Business records and tax returns

Self Assessment tax returns
With only a couple of weeks left to get paper self assessment tax returns in on time, HMRC are reminding taxpayers that if they do want to submit a paper return they need to do it soon. The rules on penalty charges have toughened up this year and taxpayers will be faced with a fine even if there is no tax to pay or they subsequently pay tax due on time in January. Bizarrely, if tax payers decide to file their returns on line but also send in a paper tax return which arrives after the 31 October deadline they will still be fined.

The alternative to paper filing is to file directly on line. This has the benefit of an extended 31 January deadline as well as instant acknowledgement of receipt of the return. Whichever method is chosen, it is important that deadlines are met or you may finish up facing instant penalties as well as further charges after 3, 6 and 12 months. A recent freedom of information request has revealed that this year 1.5million self assessment taxpayers were fined and experts expect the figure to be higher this time around as the regime gets tougher.

Business Records Check
HMRC have completed their initial business records assessment and have decided to extend the check from the initial eight areas of the UK into further key areas in the country. The initial exercise was commissioned to test the HMRC view that inadequate record keeping lead to underpayment of tax. Having found that 44% of businesses have problems with record keeping and 12% have seriously inadequate records, HMRC have decided to increase the number of full time staff employed on this exercise as they extend its scope across the country.

One area of concern which has been raised by accountancy bodies following the initial exercise is the perception of acceptable business records. In the past HMRC have accepted that depending on the business, a shoebox of receipts may be sufficient until the end of a tax year when all records should be brought up to date. The records check seems to be expecting receipts and payments to be entered on appropriate accounting spreadsheets on a regular basis throughout the tax year with adequate filing running alongside the data entry.

As tax mitigation specialists Newshams are able to give advice on how tax may affect any private or business transaction and how to put in place an effective mitigation strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can reduce your tax costs or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

http://newshams.com
14 October 2011

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