Archives for 2011

On 17 December 2010 HMRC announced their intention to roll out a programme of Business Record Checks in the second half of 2011. At present they are consulting with professional organisations regarding the scope of their enquiries. This consultation will be completed and the results published by 31 March 2011.

If your business is selected, HMRC staff will visit your premises and ask for access to all your business records. If they feel that there is a significant failure to keep proper records, penalties may be charged and additional tax assessments raised.

Here’s what we know so far:

HMRC’s objectives:

• Use existing powers to check business records in up to 50,000 cases annually.
• Businesses targeted will have 250 employees or less and turnover below 50m Euros. (At present exchange rates just over £40m)
• Checks to begin in the second half of 2011.
• Impose penalties for significant record keeping failures.

Issues to be resolved by present consultation process:

• Arrive at a clear understanding of record keeping obligations; primarily what records do you need to keep.
• What level of penalty should be levied to bring about the required changes in defective record keeping, and
• Should HMRC allow a “cooling off period”, before penalties are charged, to give businesses time to remedy substandard record keeping.

The consultation is not concerned with whether HMRC should have powers to check business records, these already exist!

If HMRC are aware that your record keeping is defective this will no doubt trigger visits from a number of their departments. You may get additional PAYE/NIC or VAT audit checks for instance.

There are existing guidelines from HMRC on what constitutes satisfactory record keeping that will likely form the basis of their new Record Check processes. As the results of the present consultation become available we will include further information in this newsletter.

At present owners of qualifying Holiday Let property can set off losses from the letting activity against their other earnings. From 6 April 2011 you will no longer be able to do this. From 6 April 2011 you will only be able to carry losses forwards to set off against future holiday let profits.

From a tax planning point of view this offers a short window of opportunity. Any Furnished Holiday Let losses that you make up to 5 April 2011 can be set off against other earnings for 2010-11. This could be an opportunity not to miss as higher rate and additional tax rate payers may receive 40% or 50% of the losses from HMRC as tax refunds.

If you are planning extensive, qualifying repairs to your FHL property(ies) now may be a good time to implement and complete before 5 April 2011.