Insider Media Limited

Unorganised owners of small businesses could face fines of up to £3,000 for “sloppy record keeping”, a Kidderminster-based tax firm is warning. The caution comes as HMRC has revealed that as many as two million small businesses in the UK may not have kept up-to-date records.

Audit, tax and advisory firm Crowe Clark Whitehill, which has offices in Kidderminster and Walsall, is warning companies to ensure that all their records are up-to-date.

Of the country’s 4.9 million small and medium sized businesses, HMRC has stated that as many as two million are not up to scratch. It is to probe the records of 200,000 businesses it believes are the “likely worst offenders” for unpaid tax liabilities through poor book-keeping.

Paul Edwards, tax director at Crowe Clark Whitehill in the Midlands, said: “HMRC has made it clear that the loss of tax through poor record keeping, particularly in the current economic climate, is not acceptable.

“It seems determined to use the powers at its disposal to reduce the total.”

HMRC has said it plans to select cases on the basis of risk assessment, focussing on businesses that have features associated with poor record keeping. However, a small proportion might be chosen at random.

Edwards said: “HMRC states in its impact assessment that this initiative will bring in £600m over four years. Cynics point out that four times 50,000 times 3,000 comes to £600m.

“Previously, the imposition of any penalty – let alone the maximum – has been rare.”