14 Feb

HMRC Announces Temporary Halt to Business Records Checks

You may remember us announcing HMRC's new inititaive of Business Records Checks in our newsletter a few months ago.  Well, it looks like it's all on hold for now...

On the 3rd February HMRC announced that it is to postpone making any new business record check appointments until a revamped approach outlined in a recent report is launched early in the 2012/13 financial year. 

The report following a review of BRC's carried out to date, which included discussions of the pilot programme with trade and professional bodies' representatives, found clear evidence that it is effective in improving record-keeping practices in smaller businesses. However, it recommended that the checks are more targeted in the future, linking to available education and support.

The decision to stop any further appointments being made will allow further consultation with representative bodies on the implementation of the recommendations in the review and on some details of the new approach.

In the interim, HMRC will only undertake visits already booked, as well as follow-up visits to businesses that have already been identified as having seriously inadequate statutory records.

The pilot programme of BRC's began in April last year and involved checks by HMRC on the standard of small and medium-sized enterprises' statutory business records.

HMRC have stated that up until 4th January 2012 that 2,437 business record checks had been carried out. These found that 28 per cent of those businesses visited had some issue with their record keeping, and an additional 11 per cent had issues serious enough to warrant a follow-up visit.

In making the announcement HMRC's Director of Local Compliance, Richard Summersgill, said:

"Four out of ten businesses had an issue with their business records, and of those that required a follow-up visit, we found that some 90 per cent subsequently improved their record-keeping.

However, after reviewing the pilot programme and listening to the views of businesses and representative bodies, we acknowledge the need for a fresh approach to business record checks.

The BRC visits provide benefits for the businesses and HMRC. We want businesses to pay the right amount of tax at the right time, avoiding potential interest and penalties. The checks also give greater assurance to HMRC when the business submits its tax returns."

The review states that when the programme re-starts, businesses considered to be at a higher risk of keeping inadequate records will initially be contacted by HMRC, by phone or letter, and asked about their business records. From this contact HMRC will consider whether the customer is using appropriate record-keeping systems, and identify those businesses that require a BRC visit. This initial contact will help to target those businesses that really need the help provided by a BRC visit and will reduce any burden on already compliant businesses.

If an initial visit finds a business's statutory records to be seriously inadequate, a follow-up visit will be arranged, giving them a reasonable time to get their records in order. If the records have still not improved and still demonstrate serious inadequacies, the visiting officer may refer the business for a full tax return check. If that check uncovers an incorrect return, and the inaccuracies are linked back to poor records, a record- keeping penalty would be issued.

Full details of the review can found at http://www.hmrc.gov.uk/businessrecordscheck/review.pdf

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