Firms urged to update business records or risk penalties

Business owners are being reminded to keep their business records up to date, following a report that HMRC issued large fines to a company who failed to notify the authority of a change of name.

The Forum of Private Business (FPB) is urging businesses to immediately update their business records if there have been any alternations, no matter how small, to their business's operations.

The FPB has been aiding one unnamed firm who had originally been hit with a £30,000 fine after it changed from a partnership to a limited company (ltd) and changed its name without informing HMRC.

The penalty was later reduced to £10,000, despite the firm's exemplary record of submitting tax returns and VAT payments on time. The change in business structure did not alter the firm's VAT number and no tax payments to HMRC were lost.

The unnamed company was fined under the VAT notification liabilities as set in the Finance Act 1985 and the VAT Act 1994. A House of Commons debate in July 1986 resulted in the inclusion of a legal clause to protect small traders making 'innocent mistakes' in the original legislation.

However, the FPB's tax adviser Andrew Needham, who helped to reduce the original penalty and wants it reduced further, voiced concerns in HMRC's shift in policy which led to them imposing the penalty.

Needham said the shift could see firms hit with hefty penalties when ' in reality, they have done very little wrong.'

"It is important that all small businesses are aware they could face steep fines unless HMRC is kept fully updated - but this heavy-handed approach is the very opposite of the support that is desperately needed at this difficult time."

"HMRC risks further alienating firms hit by its disproportionate, targeted business records checks regime and widely-reported poor levels of service."

The FPB is critical of HMRC's 'disproportionate' treatment of small firms, particularly its business records checks regime, while it said 'large companies routinely get away with widespread tax avoidance.'

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