Keep tax records up to date or face £3k fine, warns FPB

Small businesses, including pubs, have been warned to ensure their tax records are up to date or else they could face fines of more than £3,000.

The Forum of Private Business (FPB) said that despite government promises of a 'lighter touch' when dealing with errors made when implementing the recent VAT rise, the tax authorities were planning to clampdown on what are called "significant record keeping failures" and probes into unpaid taxes.

Matt Homes, the FPB's accountancy adviser, said HM Revenue & Customs (HMRC) was 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," he said.

"Obviously entrepreneurs will want to make sure they are not caught out and hit in the pocket at a time they can least afford it, but 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," he added.

Holmes said HMRC's decision "to clamp down on struggling firms rather than provide further support to help them is unfortunate but it is a fact that small businesses are much more likely to succeed by keeping good accounting records. It allows them to keep on top of their cash flow and plan ahead".

A spokesman for the HMRC said it "would continue to offer a sympathetic ear to businesses - and individuals - in temporary financial difficulty and will continue to offer this service as part of our 'time to pay' arrangements for as long as it is needed.

"However, there is little HMRC can do for a business whose viability is dependent on not paying the UK taxes to which they are liable, or on special treatment not available to other customers with similar tax affairs."

HMRC was planning a programme of Business Records Checks starting later this year, the spokesman said, "that will review both the adequacy and accuracy of business records within the 'small and medium enterprise' (SME) sector, to achieve a major improvement in the standard of record-keeping".

A public consultation document was published on December 17 last year, he added, with proposals on how best to implement and carry out such checks, with responses invited by February 28.