CH405187 - Charging penalties: suspending penalties: setting suspension conditions: specific conditions: SMART examples: Failure to keep records example

Failure to keeps records example - description and action

1 How the inaccuracy arose

Whilst carrying out a compliance check, the caseworker realised that the person simply did not keep business records and used understated estimated figures to arrive at returned business profits, nor did they retain records of self-employed income.

The person did not have the know how - was new to business.

2 Specific conditions set - SMART criteria NOT met

To put this right the caseworker set the following condition:

You will keep all receipts and invoices

The above is not a SMART condition. It is not sufficient just to keep records - the person is obliged to do so. See CH10100.

The caseworker needs to be more specific as to what the person needs to do to avoid further inaccuracies.

3 How to make the specific conditions SMART

To make the above condition SMART the caseworker should set the conditions that will ensure that the person has a process/system in place that will make sure they

  • keep both written and electronic records of all receipts and expenses in the course of the business from a specific date
  • keep both written and electronic records of all sales and purchases made in the course of the trade from a specific date.
  • retain copies of all receipts and invoices and ensure they are used in completing the return by the statutory filing date.

The above conditions are Specific, Measureable, Achievable, Realistic and Time bound.

4 Methods of checking the suspended conditions to ensure they have been met

As above, the caseworker should be satisfied that the record keeping systems put in place satisfy the SMART conditions and are therefore sufficient to prevent the careless inaccuracy occurring again.

This can be achieved by telephoning the person, writing to the person, visiting the business premises or by any combination of these methods.

Correspondence: If the caseworker chooses to achieve this through correspondence, then more is required than simply receiving written confirmation from the person that the system changes have been made. The caseworker would wish to consider which documents to request from the person to be satisfied that the changes are in place. The caseworker, for example, may ask to see copies of the sales records and purchase records covering a limited period.

Telephone: If the caseworker chooses to achieve this by means of a telephone call, it will not be sufficient to simply ask for confirmation from the person that they now keep records. The caseworker will be expected to ask questions in sufficient detail about how the person now records income and expenditure. If the caseworker is still not satisfied that the person has complied with the SMART conditions, it may well be that the caseworker will wish to see the system or copies of the records.

Visit: In some cases the caseworker may wish to achieve this by visiting the business to see the system.