HMRC targets small businesses with compliance checks

HMRC claims that more than two million small business owners could be keeping inadequate records, which in turn leads to an underassessment and payment of tax. Raising revenue aside, poor record keeping is one of the top reasons why a business fails and so it also benefits small businesses to get their house in order.

So, what business records should you be keeping?  To quote HMRC guidance "You must keep records of all your business transactions."

This will vary depending on the type of small business you are running, if it has employees and also whether it is VAT registered. While there are a number of online resources available to support small businesses on the specific types of records it should keep, a quick check list should include:

  • A cash book
  • A petty cash book
  • A sales and purchase ledger
  • A wages book
  • Invoices and receipts both issued and received
  • Electronic records of sales or till rolls
  • Details of items not rung through the till
  • Details of incidental or miscellaneous income - for example rent for accommodation owned by the business
  • Hire purchase and leasing details
  • An inventory of stock on hand at the end of the accounting year
  • Bank and building society statements, pass books, cheque stubs and paying-in slips which include details of business transactions
  • Details of any money taken out of the business personal use
  • Details of any private money brought into or taken from the business

When it comes to keeping on top of your finances - don't put it off.  It's important to set aside dedicated time each week to review and update your books. While jotting things on paper may work for some people, it is not the most effective way to work.

Of course, an easy way to get organised is with financial management software. It will help understand how your business is doing and ensure you have everything to hand, should HMRC pay a visit.

Find out more about compliance checks. Watch the video below:

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