HMRC Records Check Phone Call

A question about : HMRC Records Check Phone Call

Hello there.

I've been self employed for 8 years and received a letter from HMRC recently telling me to give them a phone as they want to perform a Business Records Check. The first step of this is a 15 minute phone call.

I've had a search online and found a list of commonly asked questions. Mostly they seem straight forward, for example how many sales do you take per month. The interviewer then gives the caller multiple choice answers.

I keep a record of my business sales and expenses separately in some spreadsheets.

I feel 1 of the questions I found could potentially flag something up at their end.

How are personal and business expenses kept separate?

I only use 1 bank account for both my personal and business transactions. Yep I know it's a bit silly, but it's not a requirement by law and I've just never got around to it. I don't have many business transactions so it's really easy to pull details out of the account and record them in my business docs.

Do you think answering along those lines will be sufficient? ie. I keep my business records separate in business documents.

Cheers.

Best answers:

• I just use the same account too. I annotate the statements before scanning them i.e. cross-reference the payments to me to an invoice number. The statements show total amounts paid for electricity etc; my spreadsheets show the percentages claimed for business purposes.
  Has anything happened recently that might have triggered HMRC? A large, sudden drop or rise in income or expenses?
• nope. everything's been as per normal lately. I'm hoping I've been selected randomly.
  Only abnormal thing I can think of is my student girlfriend needed to submit my latest tax return to claim council tax benefits.
• Have you got "books" where all business expenditure/income is clearly listed? That means that anything not in those books is personal.
• It may be random, it may be that one of your customers or suppliers has just failed an audit so they're checking a wider circle.
• @mistral001 Yes I have my business income/expenditure clearly listed in spreadsheets for the corresponding tax years.
  @paddyrg, hmmm interesting thx.
• @Pennywse, yep stuff like that I put down as 1/4 of the total price in my business expenses. I live with 1 other person who pays half and I calculate that I'm 'at work' around half of my time using the computer/internet/phone. All seems reasonable to me. And such small numbers in the scheme of things :-/
• I am assuming that they will want to be sure that you are keeping good records and that you are declaring all income received. Where you are claiming expenses, they may want evidence of expenditure and a good case for business use where this is a percentage. When I first registered as a sole trader, I got a standard letter saying that it was common for people to under declare income and over claim for expenses.
  Are you ever paid cash in hand? HMRC do hit certain sectors from time to time e.g. private tutors, market stall holders.
• @PlutoinCapricorn. I think my records are good enough. I don't really make many transactions. It's a very simple business. I have between 1-10 expenses and 1 to 2 sales per month. None of which are cash. There's not really any scope for me to under or over declare anything.
  Freelance graphic designer btw.
• There is no harm in exploring possibilities.
  Taxi drivers are constantly under suspicion!
  Something else to think about is whether or not your expenses are reasonable considering where you work and what you do. A plumber who is always out would claim more for driving and less for Internet than a consultant who is home based for example.
  There was someone on here a while back who got a similar phone call, and it was not his business that was being investigated but someone else's, a supplier I think.
• Also remember your answers are recorded and noted on your records. If you don't answer honestly, and HMRC do a proper enquiry later on and find problems, you'll be looking at higher penalties because they will deem the problems to have been "concealed" which pushes you to the highest penalty scales. So answer honestly and not what you think they want to hear to close the phone call as quickly as possible!
• @pennywise, yep cool, will do.
  EDIT- So just gave them a call and got asked the exact same questions I'd found others post online. I'll repeat them here incase it helps anyone in the future. I'll include my answers, the call didn't say it was confidential and the info really isn't very sensitive. Note all answers are from multiple choice
  Are you still self employed? - yes
  Do you have an accountant? - no
  How long have you had the business? - over 2 years
  On a scale from 1-9 how aware are you of your obligations to HMRC? - 8
  On a scale from 1-9 how much help do you need with HMRC forms? - 9
  How many sales do you take per month? - 1 to 10
  How many are in cash? - none
  How often is this recorded? - monthly
  How many payments are made per month? - 1 to 10
  How many are in cash? - none
  How often is his recorded? - monthly
  Do you have any employees? - no
  After which he said the last answer took care of the rest of the questionnaire and that my answers meant in this case I wouldn't need further help or advise from HMRC.
• As others have said you could have been chosen just at random. One other possible reason is lack of an accountant (I am not one BTW).
• It sounds more like a survey than an enquiry or investigation.
  This thread should help other people in the future.