Ahead of their initiative to clampdown on poor bookkeeping, HMRC has launched new free ‘tools’ to help freelancers keep their business records in an acceptable state. Rather than tools (which I think should involve a certain amount of user interaction), all but one of these are documents which simply outline your bookkeeping responsibilities and how to fulfil them.
Nonetheless, they are useful guides which are well worth reading for any freelancer in need of clarification over their filing requirements. Thankfully, they are not littered with incomprehensible jargon. The documents include:
What you need to know: a basic guide with a helpful list of where to get more information. I particularly like the tables at the bottom which outline what records you need to keep depending on whether you are self-employed (sole trader), run a limited company, or are VAT registered.
Detailed guidance on record-keeping covering what type of records you may have to keep, common problems and examples for different types of business. This is a good user-friendly guide, including advice on what records you need to keep when working for yourself.
With example spreadsheets and useful hints and tips on cash sales and creating a sales and purchase ledger.
Poses various questions about your bookkeeping processes. And then offers advice on what you could or should be doing better.
The release of these guides comes in advance of a bookkeeping clampdown in the second half of 2011. 50,000 of the UK’s worst record keepers will be singled out. Those freelancers with seriously inadequate record keeping processes may face hefty fines of £3,000. The Revenue estimates that 40 per cent of SMEs – 2 million businesses – do not keep adequate records, even though they are legally bound to do so.
Brian Redford, HMRC’s Acting Director, Business Customer Unit, outlined the importance of good bookeeping:
“In these tough times, keeping good records makes sound business sense.
“It may seem like a challenge, particularly when you’re starting out, but keeping good records will bring real advantages to your business. Get a proper system in place and you’ll not only be confident that you are paying the right tax, but you’ll keep up-to-date with how much you owe suppliers and how much you are owed.
“Later this year, HMRC will start a programme of Business Records Checks that will look at the adequacy and accuracy of business records in SMEs to bring about a major improvement in the standard of record-keeping. Now is the time to invest a bit of effort to make sure your business records are perfect.”
In other words, we’re giving you all the tools you need to ensure your record keeping is properly maintained: There is no excuse for failure!