Legal records management

Keeping accurate records falls increasingly under the FMs remit, and is now necessary to prevent a hefty fine from the HMRC under new inspection regimes

2 June 2011
The HM Revenue and Customs (HMRC) introduced new inspection regimes for proper information and record keeping on 1 April 2009. This was extended on 1 April 2010 to cover more businesses and types of records. Recently HMRC undertook an inquiry into extending these powers to levy fines on businesses that are not keeping proper records.

Fines of up to £3,000 are now a reality for failing to produce appropriate records when requested. However, costs could mount up beyond this if further legal action was taken and potential reputational damage could result. The inquiry ended on 28 February 2011 and the new inspections are expected to come into force late 
in 2011.

HMRC is expected to perform some 50,000 inspections annually and, with many organisations not keeping appropriate records, a significant amount of money may be raised through fines, perhaps as much as £600m.

Around half of UK businesses are scanning newly received paper items and filing them electronically rather than manually, with a third of businesses looking to move to all-electronic records-keeping.

Why the change?
The ability of those in business to make a complete and correct return of their taxable business profits depends directly on them keeping full and accurate records of all their business transactions. However, there is evidence that poor business records, generally leading to a loss of tax, is a problem in around 40 per cent of businesses. Intervention is therefore deemed necessary to reduce the amount of tax lost as a result of poor record keeping.

The FM impact
In many organisations, those responsible for facilities management also have some level of responsibility for managing records and archives. As records become inactive, whether in physical form or increasingly in electronic format, facilities managers are often held responsible for archiving and preserving records on behalf of the organisation. This naturally means they also inherit the task of retrieving these records in the event of an inspection by HMRC or others.
Many organisations, especially smaller ones, don’t have the budget or desire to appoint a records manager, information manager or data protection officer and thus this responsibility often falls to the facilities manager or is distributed across several roles. This leads to unclear overall responsibilities, silo record stores and no overall record keeping and management system and policy.

It isn’t just about storing and retrieving cardboard archive boxes. Facilities managers, who have often been given no training, also have to manage the legal aspects of retention and storage of key business records, ensuring they are held in an easily findable and auditable manner.

What you can do
In preparation for a potential inspection, and as a good business practice, facilities managers can take a number of practical steps:
1. Set up a record keeping system that caters for both physical and electronic records and create a record classification system or file plan
2. Establish security controls and user access permissions so that records are managed and properly controlled
3. Set up a retention and disposal schedule identifying how long records need to be retained
4. Publish a policy, some simple record keeping procedures and guidelines to help staff identify which records need to be managed and kept
5. Implement a training and awareness programme


Summary

- HMRC will be looking to carry out inspections to ensure proper record keeping. Failing to keep proper records could result in hefty fines and reputation damage.
- The inspections are due to start later in 2011, with all businesses needing to keep their accurate and complete records for at least six years.
- HMRC could inspect up to 50,000 businesses each year.
- Facilities managers are often responsible for keeping and managing records and archives.
- Facilities managers should implement good record keeping systems, undertake a file audit, create polices and put in place a records retention and disposal programme.


Quick facts
1 The volume of paper records is still increasing steadily in 56 per cent of organisations, but in 22 per cent it is at last showing signs of decreasing. Meanwhile, the volume of electronic records is “increasing rapidly” for 70 per cent, and unsurprisingly, is not decreasing for any.
2 Electronic records are more than twice as likely to be described as “Unmanaged” than paper records.
3 Half of organisations are scanning newly received paper items and filing them electronically rather than manually, and a third of businesses are looking to move to all-electronic record-keeping.
4 Half of organisations would “possibly” store records in a local, identifiable outsource, but 77 per cent state they would never use a public cloud (eg Google, Amazon or Microsoft).
5 Over 70 per cent of organisations have made no plans or provision for long-term archiving of electronic records, with no policies for migrating to new media, translating formats, 
or virtualisation of applications.

Source: AIIM

May Ladd is the founder and CEO of Vaultium, an online document management service