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Small firms urged to keep their books in good order

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Smaller businesses are being urged to maintain up-to-date and accurate financial records.

The call has come from the Forum of Private Business (FPB) in response to plans by HM Revenue and Customs (HMRC) to clamp down on significant record keeping failures this year.

HMRC could be looking at as many as 50,000 firms each year to make sure that their records are in good order.

‘Inadequate’ or ‘inaccurate’ records could result in a fine as heavy as £3,000.

Under the law, firms must retain records that date back at least six years.

The documentation needs to include invoices, bank statements, receipts, cheque stubs, till rolls, paying-in slips, bank and credit card statements and a full set of accounts, .

Matt Holmes, the FPB’s accountancy adviser, said: “HMRC is planning to clamp down on small businesses tax payments and record keeping from the middle of 2011. But it is important that firms act now to get their houses in order – for many this will represent a lengthy administrative headache.

“Obviously entrepreneurs will want to make sure they are not caught out and hit in the pocket at a time they can least afford it, but the key is to focus on creating business intelligence that you can use to your benefit, rather than just keeping records for the tax man because you have to.”