Arguably one of the burdens of business ownership is the maintenance of company records. This is certainly more prevalent with small (usually) family owned businesses where every so often you have to sit down and bring your books and records up to date.
Unfortunately, there is a worrying trend where I am asked for urgent assistance yet delays are caused by the need to get the books and records in order. In some cases that delay has resulted in the company requiring the protection of administration rather than a stand alone company voluntary arrangement or restructuring outside of any insolvency process.
Should you be one of those who look for an excuse to do something else and put off the book keeping, here are a few reasons to encourage you to think again:
- It is a criminal offence not to maintain books and records commensurate to the size of your business that allows you at any given time to have an understanding of the financial position.
- It provides you with a good idea of where the business is heading. Time and again directors face personal liability for antecedent transactions entered into when trading whilst insolvent.
- The HM Revenue & Customs (“HMRC”) business records checks programme.
Although point (1) above is nothing to be sneered at, business owners ought to be particularly aware of point (3). A pilot scheme was tested in 2011 by HMRC where they attended small and medium-sized businesses in order to check the “Adequacy” of their business records. In a test comprising 800 visits HMRC found that 44% of those attended had issues with their accounting records, with a further 12% being classed as seriously inadequate.
While the scheme has been criticised, HMRC are expanding the record-checking team from 30 to 120 and expanding the programme with the real threat of a national roll-out once the procedure is fully refined. Initially, they will only impose a levy (fine) on the worst cases but, I would suggest this will only be temporary and, before long we will hear of fines up to £3,000 being imposed. Not being one for scepticism, I would suggest these adequacy visits will include checking on tax compliance and so lead to an increase in surcharges etc for “Slippages”.
The message is loud and clear; ensure your books and records are up to date and compliant. Personally, I would suggest you have a bookkeeper who works closely with your accountant. This has several benefits, including working together normally results in the preparation of annual accounts being more economical and, secondly, any deficiencies in the accounting records should get flagged at an early stage. The alternative to this could be HMRC or worse, an insolvency practitioner!