Except for PAYE/NIC’s and the Construction Industry Scheme, there are penalties for failing to maintain proper records and for failing to retain them for the prescribed period. The failure may also lead to a penalty for inaccuracy in the taxpayer’s tax returns.
If poor records are discovered in the course of a pre-return compliance check, the officer will advise the taxpayer on how to improve their records to avoid being charged a penalty. A note will be made of the inadequacies in the records and the advice given to improve them. The record keeping will be checked again at a future compliance check and a penalty may be charged if the record keeping has not improved.
If the compliance check shows that tax has been lost due to poor record keeping a penalty for inaccuracy in the taxpayer’s tax returns may be due as well as a penalty for poor records at that stage and to suspend the penalty for inaccuracy. In that case, they will warn the taxpayer that a failure to improve the records will result in a penalty for failing to keep proper records, on top of which the suspended penalty for inaccuracy will also become due. The position will be checked again at the end of the period of suspension and if there is no improvement both penalties will become chargeable.
The penalty for concealing or destroying records required by an information notice is the standard failure penalty and is subject to the defence of reasonable excuse. If the information notice was approved by the tribunal, it is a criminal offence to conceal or destroy them.