Technology has made it easier for HMRC to understand how taxpayers manage their affairs. But consequently HMRC is now more frequently finding errors. While there is not necessarily any suggestion of deceit, it does not hurt to look at the most common reasons for official intervention.
The consequences of failing to keep records can be significant. In a recent tribunal case, a vehicle repairer failed to keep records for a number of years. HMRC raised an assessment of lost VAT amounting to over £46,000 based on only two invoices – the only information available to it over the period. The taxpayer challenged this, but the tribunal upheld the assessment as the judge considered that HMRC had made a reasonable estimate on the limited evidence available.
Records are everything and businesses need to retain enough information to accurately calculate their tax position. Although they can keep their records in any form, owners need to think about what taxes they pay and the implications of HMRC’s Making Tax Digital when they are considering how they keep business records.
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