15:36 PM, 17th March 2011, About 11 years ago
Plans by HM Revenue and Customs to inspect landlord and small business financial records in a bid to spot cheats are under fire from tax experts.
HMRC wants to check out 50,000 landlords and businesses annually, starting from later this year.
Part of the £900 million extra funding has gone towards recruiting and training more tax staff to carry out the spot checks.
Landlords and businessmen who fail to keep proper records face fines – and the Chartered Institute of Taxation (CIOT) claims the campaign is more about raising cash from fines rather than helping taxpayers run a better business.
HMRC plans to visit each landlord or small business once every four to five years with more regular checks for businesses who are judged as poor record keepers.
HMRC has also published guidance on how to keep good financial records.
CIOT– which plays a key role in the Treasury’s tax simplification project – says the rules are ‘misguided’ and will not improve the tax system.
Anthony Thomas, CIOT Deputy President, said: “CIOT is strongly supportive of efforts to improve record keeping by business. Many tax advisers have struggled to get clients to follow best practice in this area and would welcome HMRC’s assistance in persuading them.
“However we do not believe this project will meet that objective. 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.
“In addition, while supportive in principle of systems based pre-return checks that provide guidance and education to businesses, we think that the legal basis for levying penalties as a result of such a check prior to submission of a return is questionable unless there is a failure to keep any records at all or there has been a failure to preserve them.
“A penalty should only be levied once it has been proved that the bookkeeping records have led to an incorrect return. The penalty should be linked to the incorrect return.”
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