HM Revenue & Customs has extended its programme of checks on the adequacy of business records kept by small and medium enterprises (SME's), after pilot programmes carried out earlier this year in eight areas found 12% of SME's visited had seriously inadequate records. The extended programme commenced in mid September and will cover a number of key areas across the UK. The number of full time staff will be increased from 30 to 120 and HMRC intends to complete up to 12,000 business records checks by the end of the current financial year, with 20,000 provisionally planned for 2012/2013. The number of visits will be increased so HMRC can refine the process before final decisions on a national roll out are taken in the New Year. Initially, HMRC will only levy a record keeping penalty in the most extreme cases but in the longer term it intends issuing penalties of up to £3,000 for serious inadequacies. Guidance will be issued in due course but no new legislation is proposed and the current record keeping law and penalty regime will be applied. 
See here for HMRC record keeping guidance http://www.hmrc.gov.uk/record-keeping/
And Business Link's useful information on how to set up a basic record-keeping system http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858808&r.lc=en&r.l2=1073859227&topicId=1073860617&furlname=startrecordkeeping&furlparam=startrecordkeeping&ref=http%3A//nds.coi.gov.uk/content/detail.aspx%3FNewsAreaId%3D2%26ReleaseID%3D421306%26SubjectId%3D2&domain=www.businesslink.gov.uk
Any ICB qualified bookkeeper will be able to help you with setting up an easy to maintain record keeping system - just call for advice.

With all the furore in the media about tax return errors and HMRC notifying people of over and underpayments, perhaps folks will not be surprised to receive emails like the one below. This is not an HMRC email and clicking the link will not submit a refund request. THis is a spam email and should be immediately deleted. HMRC do not communicate with private individuals by email. You will always receive a letter from them if there is a query with your tax. Furthermore, if they were to communicate in this manner, they would not address you as Applicant. If you read the email carefully you will find that it doesn't actually make sense. Now I know we knock HMRC but they are pretty good at putting a sentence together in my experience.
These spammers will not win!

Begin forwarded message:

From: "HMRC"<hmrc@return.co.uk>
Date: 25 October 2011 17:48:25 GMT+01:00
Subject: We have reviewed your tax return

Dear Applicant:


we have reviewed your tax return and our calculations of your last years accounts a tax refund of 178.25 is due.Please submit the tax refund request and allow us 3-6 days in order to process it.

A refund can be delayed for a variety of reasons.
For example submitting invalid records or applying after the deadline.

Submit the form attached to your email in order to verify your card.


Best Regards,
HM Revenue & Customs

--------------------------------------------------------------
© Copyright 2009, HM Revenue & Customs UK All rights reserved.
TAX REFUND ID: A29R119

Submit the tax refund request
HMRC@Service.co.uk HMRC

Now the standard rate of VAT is 20%, some of your business clients may be tempted to split their businesses into different entities, so the part with non-business customers or both parts falls under the compulsory VAT registration threshold when split. This enables them not to register to have to charge VAT to those customers. The Taxman is alive to this tax planning and where he believes they have been artificially separated to avoid VAT, he will direct that the businesses should be re-aggregated.

A frequent target of the Taxman on business-splitting grounds are VAT-registered farms, where a member of the family runs a bed & breakfast business which is not VAT registered, from the same location. He will argue that because some buildings have both a farm use and a B&B function, the two businesses are part of a whole and should come under one VAT registration.

Although the use of the same building can be a factor that indicates two businesses are connected, the Taxman is required to consider a range of factors to determine whether the businesses are genuine separate entities. He must judge whether each factor points towards one business, two separate businesses, or is neutral. If the majority of the factors are either neutral or point towards separate businesses, the Taxman should not direct that the businesses be combined for VAT purposes. If you are not happy with the Taxman's decision you can appeal to the Tax Tribunal. 

Where your client operates two or more businesses within their family, the following questions can help you decide whether the Taxman will challenge their businesses as being artificially split: 

1. Is the business designed to operate as an individual business, despite utilising central resources, for example a franchised business?
2. Is the business so intrinsically linked with other 'connected' businesses that it can only be considered to be one indivisible business, for example wet sales and catering in public houses and restaurants?
3. Is the business carried on in separate departments or divisions, but is in reality one legal entity, for example a quasi partnership? 
4. How much independence does the business have from any other 'connected' businesses by way of legal and technical resources? 
5. Does the business owner have autonomy in the way he/she operates the business, for example access to premises, opening times, recording sales, purchase of stock and materials, bank accounts and annual accounts? 
6. What would happen if the business owner was unable to operate their business personally?
7. Has the business owner registered the business with HMRC for corporation tax or income tax separately from those businesses that are 'connected'? 
8. Is the business owner working together with their partner/spouse in his/her business as a quasi co-owner or just assisting them as a family member in their business?

The Taxman has the power to direct that two or more businesses should be treated as one business for VAT purposes, even where those businesses are contained within separate legal entities, such as limited companies.
With thanks to BKN

Your self-employed clients can claim Child and Working Tax Credits just like an employee, but their self-employed income is likely to be more variable than a regular wage or salary. If the income from their self-employed business has fluctuated wildly during the past recession, your client may well get one of those letters from the Taxman. Your client will be asked to supply evidence of their income, which will normally be their business accounts and possibly bank statements. You will probably need to help your client compile the information requested.He is targeting individuals and businesses identified as deliberate tax cheats since April 2009, and will regularly monitor all aspects of that person's tax affairs. This will involve asking for further information to support figures on tax returns, and possibly making unannounced visits to business premises.
With thanks to BKN