2009/10 UK E-Filing deadline fast approaching and the latest UK news
“New Year's Day - Now is the accepted time to make your regular annual good resolutions. Next week you can begin paving hell with them as usual.” - Mark Twain
Just a quick reminder to let you know that the 2009/10 filing deadline is fast approaching and HMRC has been getting its reminders out to all and sundry. The deadline for paper filing 2009/10 passed on 31st October last and now we are fast approaching the e-filing deadline on 31st Jan. If you are unsure of whether you need to file a tax return you should check out our webpage for details of the main reasons why you may need to file a return.
If you miss the deadline an automatic late filing fee of £100 is imposed. If the return is still not filed by 31st July, an additional automatic fee of £100 will be applied. If you owe tax for the 2009/10 tax year, it needs to be paid on 31st Jan otherwise you'll suffer interest daily and potential surcharges of 5% applied. This all points to the fact that failure to be tax compliant can quickly add up to be a costly affair. Regular readers will know that this blog has never been a product pushing vehicle but it would be remiss of us not to mention that taxback.com offers a comprehensive tax return service for a fixed fee so if you’re interested in finding out more about this, you can register here.
HMRC launches probe on SME's
You may have missed it over the Christmas period but HMRC launched a consultation document on 17 December entitled: "Consultation on Business Record Checks". It uses the word ‘consultation’ but don't let that fool you; the consultation is only on how they will conduct this review; the review itself is not up for discussion.
Well, HMRC believes that approximately 5 million small and medium enterprises (SMEs) have poor record-keeping practices which is leading to a tax loss concerning at least 2 million SME cases every year. To counter this, they intend to review 50,000 SMEs annually with the hope of recovering tax and/or penalties and instilling better record keeping practices within the sector. No new legislation is to be passed; instead it is intended that existing powers will be utilised (see more below).
How will they choose the cases to review?
The first thing to note is that the review is aimed at SMEs which are basically any business enterprises with a turnover of less than £50 million and with less than 250 employees.
HMRC "plan to select cases for a Business Records Check on the basis of risk assessment, focusing on businesses that have features associated with poor record keeping. However, a small proportion might be selected at random to verify the worth of Business Records Checks and to help improve the risk assessment criteria. The corrective impact of Business Records Checks could be increased, and poor record keepers further encouraged bringing their records up to standard, through leverage. For example; when we identify a business population as having the features associated with poor record keeping, we could write individually to that population explaining:
that they are in a category at risk of having poor business records; that HMRC will be conducting checks of the business records of many of those in that population,
and that they are, therefore, more likely to be chosen for such a check in the coming year."
Where will the checks take place/how long?
You may recall that, 2 years or so ago, there was a bit of a furore over new powers of inspection granted to HMRC. In the upcoming review, it will be these "new" powers upon which HMRC will rely (namely Sch 36 FA 2008). The main focus at the time was whether HMRC had the power to enter homes to inspect records but subsequently the powers were clarified and relaxed as the draft made its way through parliament. As HMRC states in the consultation document:
"The law allows an officer of HMRC to enter a person’s business premises and inspect statutory business records, where that is reasonably required for the purposes of checking that person’s tax position. Any premises on which the statutory records are kept are, for these purposes, ‘business premises’, (but this power does not cover entry to any part of premises used solely as a dwelling)."
The law also requires HMRC to give 7 days’ notice (the original draft was 24 hours I seem to recall but this too was relaxed by parliament).
What is HMRC looking for?
The law sets out that records must be kept; they do not however specify what actually constitutes ‘records’. HMRC's guidance is available here and the consultation seeks to quantify what action and penalty should be applied in cases where there is failure to keep records.
The consultation ends in February and we can expect to see the checks start shortly after. We will of course keep you up to date on any developments as a result of this consultation but if you run an SME it may be worthwhile evaluating your record keeping practice now. We’d like to wish all our readers a happy new year and look forward to bringing you the latest UK tax news as it unfolds in 2011.