The Federation of Small Businesses (FSB) has voiced its alarm over an HM Revenue and Customs (HMRC) consultation that could cost SMBs up to £600m over the next four years.
The consultation, called ‘Business Records Checks’, which closes on Monday, could lead to implementation of spot checks on company records, the FSB claims, which would result in a fine of up to £3,000.
According to the FSB, up to 50,000 small firms will be targeted by HMRC agents to check that their business records meet minimum reporting standards.
But the organisation is most concerned that the consultation lacked information on how HMRC would choose businesses and carry out the checks.
Also, it claims that HMRC did not draw up details of what standard criteria would be used to assess each business, and that it would be difficult to justify a ‘significant failing’, because firms across sectors differ so much.
The FSB is calling for more guidance, and is also recommending that the charging process is left as it currently stands, with small firms given a chance to improve their records, rather than being faced with a ‘first offence’ penalty.
Roger Bibby, FSB economic, tax and finance committee chairman, said: “FSB research has shown that one in 10 small firms spends more than six hours per week fulfilling their tax responsibilities.
However, many small businesses do not have a dedicated finance or accounting department and will be unaware of the intricate details of tax obligations – especially when starting out.
“Rather than imposing fines, which could cripple some small firms, it would be more pertinent for HMRC to move to a system where small businesses are encouraged to improve record keeping and understand their tax obligations better,” he added. “At a time when the government is looking to promote growth and get the recovery on a firmer footing, adding to the bureaucracy that a business owner has to deal with through additional checks, goes against what the government is trying to achieve.”
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