HMRC is preparing to make greater use of information supplied by banks, payment providers and other third parties.
Under new requirements due to take effect from April 2028, merchant acquirers and payment facilitators will have to collect, verify and report more consistent information about card sales. HMRC intends to use this information to match payments with taxpayer records, issue digital prompts and target its compliance activity more effectively.
Although implementation is still some way off, the announcement highlights an important issue for SMEs: HMRC increasingly has access to information that can be compared with the figures shown in business accounts and tax returns.
Card receipts don’t always equal turnover
At first glance, HMRC may expect a business’s reported sales to correspond with the payments processed through its card terminals or online payment platforms. In practice, the figures will not always match.
Card receipts can include customer deposits, tips or amounts collected on behalf of another business. The total may also be affected by refunds, chargebacks, duplicated transactions and timing differences around the end of an accounting period.
Some businesses transfer funds between their own accounts or use more than one payment provider. Others make a mixture of card and cash sales. There may be entirely legitimate reasons why the figures held by a payment provider differ from the turnover reported in a VAT return or annual accounts.
The problem arises when a business can’t demonstrate and explain those differences.
Why record-keeping matters
If HMRC’s data suggests that card receipts are higher than reported turnover, it could prompt a query or compliance check. Even if you’ve reported everything correctly, poor records may make responding time-consuming and stressful.
It’s always good practice to ensure that sales recorded in accounting software are regularly reconciled with card-provider statements and bank receipts. Refunds, deposits and other non-sales amounts should be recorded clearly rather than corrected with unexplained adjustments later.
It’s also important to keep supporting documentation. Contracts, till reports, card statements and refund records may all help demonstrate why two sets of figures differ.
Regular reconciliation can also deliver benefits beyond tax compliance. It may reveal missing payments, excessive processing fees, duplicated entries or weaknesses in cash-flow reporting.
Check your records before HMRC does
HMRC’s increased use of third-party data won’t automatically mean more investigations. However, it does mean that you should expect any figures to be checked against information from a growing range of external sources.
Taking action now gives you time to strengthen your processes and resolve unexplained differences before they attract attention.
If you are unsure whether your card receipts, bank records and reported sales reconcile properly, please get in touch. We can review your bookkeeping processes, identify potential discrepancies and help make sure your financial records provide a clear picture of your business operations.