HM Revenue & Customs (HMRC) carry out checks on how businesses keep their records. If HMRC decide to look at your business records they will usually contact you by telephone. Businesses need to keep records to complete their tax returns correctly, and pay the right amount of tax at the right time to avoid interest and penalties.
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HMRC will write to you and then contact you by telephone to ask about your records. When they phone they will ask you questions to help them work out if you are keeping the business records you need to meet your legal responsibilities. The telephone call should take between 10 and 15 minutes.
From the replies you give the HMRC officer:
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If we feel you need a face to face visit, HMRC will contact you to agree a date and time. The visit will usually take around two hours.
On the visit the HMRC officer will:
If your records are adequate the visiting officer will tell you at the visit and then confirm it in writing a few days later. This will be the end of your business records check.
If the visiting officer finds your record keeping needs improving they will discuss this with you and your agent, if they are at the meeting. The officer will then advise what you need to do to make your records adequate and what will happen next.
It is not essential, but if you have an accountant or other professional advisor, you will be able to invite them to attend the visit.
If you do not have an advisor you can use form 64-8 if you want to authorise one to speak to HMRC about your tax affairs. Even if you have a professional advisor, you're personally responsible for your own tax affairs. You must make sure all the information your advisor supplies to HMRC is accurate.
Get form 64-8 to authorise your agent or adviser
If your records are found to be adequate the visiting officer will tell you on the visit and then confirm it in writing a few days later. This will be the end of your business records check.
If your records are inadequate you may have to pay a record-keeping penalty. But before this happens HMRC will give you the opportunity, and further time, to bring them to an adequate standard. HMRC will specify what improvements need to be made, and will offer you as much help and support as you need to achieve this.
HMRC will arrange a follow up visit to check that you have made the necessary improvements. This will usually be within three months of the initial visit.
If at the follow up visit you have improved your record keeping so that your records are adequate, HMRC will reduce the penalty to nil.
If at the follow up visit HMRC find that your records have still not improved to an adequate standard, a penalty will apply. The penalty is usually £500 for the first offence. For businesses in their first year of trading the penalty will be £250.
If during the business record check HMRC find that you have deliberately destroyed your records, a penalty of £3,000 would apply (this may be reduced to £1,500 if only some of your records are destroyed).
In cases where inadequate records are found, HMRC will refer you for another business records check visit in two years time. If your records are again found to be inadequate you will have to pay a new penalty.
If, during the business records check, HMRC identify that your tax returns may be inaccurate - either because you tell HMRC that you have underpaid your tax, or they identify that you potentially have a significant tax liability - the visiting officer will pass your details to other teams who may contact you to carry out a check into your tax return.
If during the business records check HMRC find you need to register for VAT, PAYE or the Construction Industry Scheme they will pass your details to the appropriate team.
Background on business record checks
Find out more about how HMRC checks your tax
