We have had a few cases on this recently.
Following a sentencing hearing at Milton Keynes Magistrates’ Court on 8 January 2016, Mr William To, a company director from Beaconsfield in Buckinghamshire, has been sentenced to 33 weeks imprisonment after pleading guilty to 3 counts of failing to preserve company books and accounting records for a period of 3 years, for three separate restaurant management companies.
Mr To’s conviction follows an initial investigation by the Insolvency Service and a full criminal investigation and Prosecution by the Department for Business Innovation and Skills (BIS).
The three BMBQ Ltd, ,Shef Ltd and Broads Cat Ltd, based in Sheffield and Birmingham, went into liquidation with an as-yet-unpaid combined debt of £302,105.89 to HMRC.
The investigation found the director had failed to ensure the companies’ were in order, as such, they could not be delivered up to the liquidator as required.
Also in Tips & Advice Tax 14-07-2016, the case of Denise Perry (Quantity Surveyor) was reported. She ceased trading in 2012 but in April 2013 HMRC launched an investigation into her expenses. The Law requires that you keep documents for at least 4 years, but she told HMRC she had no records and in the end produced a spreadsheet full for round sums and estimates, the First Tier Tribunal wasn’t impressed and allowed HMRC to estimate her expenses and retrospectively bring a claim for unpaid tax covering the previous 4 years.
The Companies Act states
4)Accounting records that a company is required by section 386 to keep must be preserved by it—
(a)in the case of a private company, for three years from the date on which they are made;
(b)in the case of a public company, for six years from the date on which they are made.
Section 386 Duty to keep accounting records
(1)Every company must keep adequate accounting records.
(2)Adequate accounting records means records that are sufficient—
(a)to show and explain the company’s transactions,
(b)to disclose with reasonable accuracy, at any time, the financial position of the company at that time, and
(c)to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation).
(3)Accounting records must, in particular, contain—
(a)entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place, and
(b)a record of the assets and liabilities of the company.
(4)If the company’s business involves dealing in goods, the accounting records must contain—
(a)statements of stock held by the company at the end of each financial year of the company,
(b)all statements of stocktakings from which any statement of stock as is mentioned in paragraph (a) has been or is to be prepared, and
(c)except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.