The Institute of Chartered Accountants of Scotland has claimed that HMRC’s proposals to check SME and umbrella company record keeping are flawed.
The Revenue intends to visit 50,000 small and medium sized enterprises every year for the next four years to check they are keeping adequate, accurate business records. ICAS would support the scheme if the visits were properly targeted. However, the Institute believes the costs of this scheme are wildly understated, whilst the incidences of inadequate record keeping are unsubstantiated.
HMRC estimates that a half day visit would cost a firm £54. ICAS, on the other hand, assesses the cost as more like £560 when you bring business disruption and adviser’s time into the equation.
Taking a half day to mean three and a half hours, ICAS worked out that it will cost the business £175 and its accountant £262.50 to deal with the visit. Add to that a 1 hour preparatory meeting with the business owner and his accountant costing £125 and you get a total of £562. More than 10 times HMRC’s estimate.
ICAS’ Ian Stewart said that HMRC is assuming that SMEs with inadequate records choose that route. This is in the main untrue. People who start a new business venture are up against a mass of bureaucracy and regulations. The Revenue should be looking to encourage proper record keeping in a positive way rather than adopting a heavy handed approach.
ICAS thinks the first time HMRC visits a business, it should offer practical advice or if necessary, a warning, rather than imposing a penalty on the owner.
The FSB has also voiced concerns about the visits. The current consultation does not explain how the Revenue will select the firms it checks, nor does it include standard criteria for assessing businesses.
Furthermore, the FSB agrees with the ICAS that a first offence penalty is unfair and businesses should only be fined if they offend after ignoring HMRC’s advice for improvement.
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