Thank you for my friends at Liquid Accounts for this information:
The HM Revenue & Customs (HMRC) have warned that they are planning to clamp down on around 50,000 small businesses over the course of 2011 for failing to maintain proper records and underpaying corporation tax. They say that 40% of all SMEs keep poor records and are likely to owe tax.
HMRC said it will use its existing powers to deal with the worst cases each year from the second half of 2011 and penalties would be put in place “for significant record keeping failures”. More than 2 million small firms that keep their financial records in poor order will be faced with investigation and fines in excess of £3,000.
The HMRC claim that this will create benefits for SMEs (other than avoiding fines and taxes) from better record keeping such as “improved financial management” and “improved chances of business success”
In very basic terms, you have to keep records going back 6 years and HMRC will be looking for things like:
- Boxes of invoices, bank statements, receipts and cheque stubs with no supporting books or analysis,
- Books that aren’t regularly kept up-to-date (i.e. at least monthly),
- Unaccounted for amounts,
- Books that appear to be compiled from bank statements rather than actual transactions (i.e. written up out of date order).
It’s best to keep your business records organised and methodical. Broadly speaking, businesses should keep records going back at least six years. For tax purposes, this includes invoices, bank statements, paying in books, and details of purchases, expense details and so on.
Matt Holmes, MD of Liquid Accounts says, “Regardless of the what the HMRC say, there are clear benefits for SMEs from better record keeping. It is a proven fact, that businesses are more likely to succeed if they keep good accounting records as they’re able to see instantly if they’ve got enough money coming in, if people are paying them, and are able to plan ahead. According to a survey carried out by Yorkshire Forward, 80% of businesses who use computerised accounting succeed whereas 80% of businesses who don’t, fail! The key is to focus on creating business intelligence that you can use to your benefit rather than just keeping records for the tax man because you have to.”
With the New Year just started this could bring a great opportunity to revisit how you do your business’ accounting, it may be the time to update your accounting package to something that will make your life easier and more organised.
By choosing newer online accounting packages, you could be one step ahead of the game. Liquid Accounts may be able to provide the perfect solution, as it is easy to use, instantly accessible, flexible and cheap.
Being online means that you can let your accountant and bookkeeper access your accounts remotely, giving you the choice of doing as much or as little of your own accounting as you’re comfortable with or can afford. And as seen with the recent weather we’ve been having, working in the cloud is a huge bonus meaning you can work from home instead of struggling with that commute.