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Contractor Business Record Checks campaign by HMRC: free online risk assessment tool

Contractors concerned that their business records might not meet HMRC’s required standards of bookkeeping can check whether they are at risk of receiving a £3,000 fine by using Business Link’s online interactive tool.

HMRC has warned that later this year it will be running a Business Records Checks campaign, aiming to target 50,000 small firms, so it might be a prudent use of contractors’ time to check their records now.

Business Link’s wizard-based recordkeeping tool asks a series of simple questions about the type of business a contractor is running and the records they maintain. It then provides contractors with an online report highlighting possible areas of concern that might require urgent action.

HMRC has also created a suite of free tools to help small businesses, including contractor limited companies, create and maintain compliant business records.

"Later this year, HMRC will start a programme of Business Records Checks that will look at the adequacy and accuracy of business records in SMEs [small and medium-sized enterprises] to bring about a major improvement in the standard of record-keeping,” explains HMRC’s Acting Director of its Business Customer Unit, Brian Redford. “Now is the time to invest a bit of effort to make sure your business records are perfect.”

According to HMRC, 40% of SMEs do not keep adequate records, even though they are legally bound to keep them, leading to an estimated loss of £6.5bn in tax every year. That’s about two million businesses, a figure that is likely to include many contractor limited companies.

But HMRC has received fierce criticism from accountancy and tax bodies. The Chartered Institute of Taxation goes as far as claiming that improving record-keeping is not HMRC’s objective, CIT’s Deputy President Anthony Thomas explains: “Its purpose seems to be more about raising money through penalties than about helping businesses improve their systems.

“HMRC are putting forward a blunt instrument designed to deliver punishment when what is needed is a collaborative process focused on providing education, guidance and support. We think they need to revert to the drawing board on this.”

Dave Chaplin, CEO of ContractorCalculator, believes that whatever the rights or wrongs of the HMRC campaign, it would be sensible for contractors to take a look at the state of their records: “Good record-keeping should be seen as being about more than just tiresome admin’; it can provide limited company contractors with valuable intelligence about their businesses, which they can use to increase profitability.”

Published: 21 March 2011

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