On 17 December 2010 HMRC announced their intention to roll out a programme of Business Record Checks in the second half of 2011. Once they have completed their consultations with professional organisations, regarding the scope of their checks, the results will be published. This should be before 31 March 2011. We will of course report further on this as and when more information is released.
Soon after reporting on this development in our February Newsletter, we received a number of enquiries from Company directors, and in particular Contractors, about whether they need to prepare and retain minutes of shareholders’ meetings and dividend vouchers, salary payslips etc. Our recommendations have not changed in this respect, in so far as we have always advised that:
a) Director/Secretary salaries should be paid separately, and at the prescribed time and amount due.We maintain electronic salary records for their comprehensive service contractor clients, and if required, for general clients. Hard copies of payroll documents, payslips etc can be produced readily for inspection purposes
b) Dividends should be paid to each shareholder separately, at the correct ratio, and should be clearly identifiable as dividend payments in the accounting records
c) HMRC do not routinely ask for copies of minutes or dividend vouchers during their checks, and in our view it is far more important that the accounting records clearly and accurately record all payments to directors and shareholders. That said, if at all possible minutes of meetings approving dividends should be kept.
In our view, by following these simple guidelines there should be no reason for HMRC to find fault with your payroll and dividend recording. If you believe there may be room for improvement to your business records, either specifically to payroll and dividend payments, or business records generally, why not have a chat with us.
Clients subscribing to our Professional Fee Protection Service (formerly Tax Inquiry Insurance) will generally be covered for matters arising from Business Record Checks. Clients not subscribing to the service, may wish to reconsider this important protection.