Article | Fabulous Women

Are you in danger of being in the RED?

Posted on 16/11/2012 Are you in danger of being in the RED?
Article written by Alida Ballard of Surrey Accountancy Services Limited.
Earlier this month, HMRC announced that they would be resuming their Business Records Check Program. The aim of the program is to check on the adequacy of Small and Medium-sized Enterprises (SMEs) statutory business records.
The analysis of the results of the pilot program which started in April 2011 shown, using a traffic light system, found that:

64% of businesses were in GREEN - no changes needed.

26% of businesses were in AMBER some issues that needed to be resolved.

10% of businesses were in RED serious issues which warranted a follow up visit.  

This article is intended to give you an overview of what keeping adequate records means and why you need to do it. If you have any specific questions not covered here, please dont hesitate to get in touch with us on 01932 353146.

Why do you need to keep good records?
The law states that you must keep all the records and documents you use to complete your tax returns. If you dont have adequate records or if you don't keep them for long enough, you may have to pay penalties.

If you can show that you have taken reasonable care to get your return right but still made a mistake, you wont have to pay a penalty.

How can you show you have taken reasonable care? Keep full and accurate records. Regularly update your records. Keep your records securely. Check with HMRC or your tax adviser if there is something that you don't understand.


How do your records have to be kept?
You need to keep all the original documents you receive. However, you dont have to keep the documents on paper. Most records can be scanned and kept electronically on a computer or a storage device such as a CD or memory stick.

Whichever way you choose to keep your records, if required to be presented to HMRC, you need to ensure that:

Both the front and back of all the documents are shown The information is presented to HMRC in a readable format


W hat should you do if your records are lost or destroyed?
If you records are lost or destroyed and you cant replace them, you need to tell HMRC that this has happened and do your best to recreate them.
If you have used provisional figures to complete you tax return, you need to tell HMRC.
If you make adjustments to your returns at a later date and you have underpaid tax, you may to pay interest and penalties.
 

How long do you have to keep your records?

Self-employed or in Partnership
If you file your tax returns on time, you must keep your records for at least 5 years from 31 January following the tax year that the tax return relates to. For example, i f you file your 2011-12 tax return by 31 January 2013, you should normally keep your records until 31 January 2018.

You will need to keep your records for longer if any of the following apply:

If you are late filing your tax return.
If HMRC have started a check on your return.
If you are buying and selling assets.  

Companies (includes anything within the charge to Corporation Tax including members clubs, societies and associations)
The records need to be kept for six years from the end of an accounting period. For example, i f your company accounting period ends 31 December 2012, the records have to be kept until 31 December 2018.
 
What records do you need to keep?
You would normally be expected to keep the following:

All sales invoices and other documents to support receipts to your business.

Bank statements and paying-in slips.

All purchases invoices and other expense receipts.

All records of purchases and sales of assets used in your business

All amounts taken out of the business bank account, or in cash, for your own and your familys personal use.

Record all amounts paid into the business from personal funds.
 

I hope you found this article useful. If you want any help or advice to help you stay in the green, please dont hesitate to give us a call.

With SAS on your team, youll be in the GREEN ! J

Till next time,

Take care,

Alida

E: alida.ballard@sas-accounts.com

W: www.sas-accounts.com

T: 01932 353146

Back Author : Alida Ballard

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