Her Majesty’s Revenue and Customs have announced a new approach to business record checks. From 1st November 2012 businesses that are thought to be more likely to be at risk of having inadequate records will be contacted by letter. HMRC will arrange to call them to go through a short questionnaire. Depending on the outcome of this call, HMRC will confirm to some customers that no further action is required. Where some issues are identified, customers will be offered targeted self-help education options. Customers who are assessed as being at risk of keeping inadequate records will be referred for a business records check visit. The previous approach was that records were checked by HMRC if they found mistakes in a tax return. The new system is intended to identify problem areas before the tax return is completed. Property business such as those run by our landlord insurance clients may well find themselves contacted by HMRC.
This new approach follows a pilot programe that started in April 2011. This involved HMRC in checking the adequacy of business records maintained by Small and Medium Sized Enterprises. By the 17th February 2012, 3,431 business records checks had been carried out. HMRC found that 36% of businesses had some issue with their record keeping of which 10% had issues serious enough to warrant a follow up visit.
Landlords need to ensure that they are keeping appropriate records of their income and expenditure and are claiming the correct allowances. An accountant’s fee is usually money well spent. Make sure you are dealing with a firm that has expertise in the buy to let sector. You will also find much useful information on the HMRC website hmrc.gov.uk