If you are a business owner, you might be aware that it is very important to keep the records of all your incomes and expenses. If you are a newcomer, then you might not have an idea about how essential it is to keep up to date records of your accounts and what consequences you may face if you don’t keep the records. But, why it is so necessary for the businesses to keep the record of their account? The main reason behind this is the legal one. Legally, you have to keep the good record of your income from your business or any other sources, so that you can fill your tax return and prove that all the figures you have mentioned while filling the return are correct.
You can maintain a good record by keeping all the invoices of purchases and sales, receipts of the various expenses done and bank records. Keeping the records of your incomes and expenses is time saving thing and it helps you to handle your business more effectively In UK, if you are a businessman, then it is very much essential to keep the records for accounts in order to satisfy HMRC.
What is HMRC?
The abbreviation of HMRC is Her Majesty’s Revenue and Customs. It is non-ministerial department of the Government of UK which has the responsibility of collection of taxes, administration of some regulatory systems like national minimum wage and payment of some procedures of state support.
As the HMRC is responsible for the collection of taxes, you can satisfy them by keeping a descent record of every money-related matters of your business. So, it is better to find an accountant and hand over the responsibility of financial matters to him or her. Accountant will keep all the records precisely as per the requirement of HMRC.
HMRC does the checking
- In case, if HMRC finds something suspicious about the tax return or VAT return and feels the assessment done is incorrect, they have the right to conduct a compliance checking. There are certain things, which make the department conduct a check. For example, a small venture suddenly puts forward big claim for VAT or a big business proclaims very less tax amount or any of the figures they have mentioned appears wrong. In order to find out about the correctness of the return HMRC has no option but to conduct a check.
- If they find everything correct after the check, then the check is winded up quickly. However, if the check claims that something is not correct, then accountants for HMRC work with accountant of your company to do the necessary corrections.
- If you have overpaid any tax, then the amount will be repaid to you along with any interest which is due, but if you have underpaid the tax, then the interest is charged on that tax. They can also issue amendment regarding the return as per the type of the unpaid tax in order to collect it.
- In few cases, if there is error in one type of tax, it relates with some other type of tax also and corrections are needed to be done in both. Suppose, if there is an error in calculating excise duty on the products which are sold; this means that, VAT charged on those good will also be wrong. So, you need to do correction for both these taxes.
- Businesses have the right to ask for review or appeal against the decisions of HMRC. They issue a notice while giving their decision and that notice has explanation about what you can appeal and what you cannot. Most of the times, the appeals are settled with you reaching the agreement with HMRC. However, if it does not happen then you can ask for a review to be done by HMRC or an independent tribunal can be responsibility to attend your appeal.
- HMRC also has the right to check how the businesses maintain their records. When they take decision to check records, they contact the business over the telephone. Businesses have to keep records in order to fill their tax return correctly and pay the exact amount carefully. This helps to avoid penalties and interest. While talking to you over the phone, they may ask you several questions. This helps them to figure out if you are keeping the records properly.
- The telephone call made by HMRC lasts for almost 15 minutes. The replies given by you to the officer help him or her to assess if you will be able to furnish correct tax return based in your records. The will state you on the phone if any further action will be taken or not. He or she will confirm it in written afterwards. If that person feels you need additional help, then you will be passed with the details of HMRC ‘s support team. If the officer feels that your records are not up to date, then he or she will Payment plan HMRC a face to face visit. The details of the visiting team will be passed to you and convenient date will be decided for the visit.
It is better to keep good records of the accounts to satisfy HMRC or the you may have to face the consequences of compliance checking in the form of extra taxes and penalties.