Proposals by HMRC to check record keeping by SMEs are flawed, says the Institute of Chartered Accountants of Scotland (ICAS) in its response to HMRC’s formal consultation on the topic.
According to ICAS business records checks could cost SMEs over 10 times more than HMRC’s estimate and will be an administrative burden too far.
HMRC has estimated that each visit, averaging half a day, will cost a business £54. ICAS has re-costed an average visit using “realistic” estimates of business disruption and adviser’s time - coming up with a total of more than £560 per visit.
ICAS has said it would support such visits if they were properly targeted, however HMRC plans to visit 50,000 SMEs each year for four years.
Ian Dewar, convenor of the ICAS Small Business Tax Sub-Committee, said: “Experience of our members in practice suggests that poor record keeping, where it arises, can often result in their clients paying too much tax. This comes about because good practitioners take a prudent line in preparing accounts and this often flexes the end result, the tax payable, in favour of HMRC.