HMRC to rethink business record checks

HM Revenue & Customs (HMRC) has announced a fresh approach to its business records checks (BRC) programme in 2012, following a review of a pilot for the scheme.

The review, which involved trade and professional bodies’ representatives, found that it was effective in improving record-keeping practices in smaller businesses but recommended that the checks were more targeted in future.

The pilot BRC programme began in April 2011 and involved checks by HMRC on the standard of small and medium-sized enterprises’ (SME) statutory business records.

Up until 4 January 2012, 2,437 BRCs were carried out, which revealed that 28 per cent of businesses visited had some issue with record keeping, and an additional 11 per cent had issues serious enough to warrant a follow-up visit.

HMRC announced on 3 February that it would now postpone making any new business records check appointments until its new approach is launched early in the 2012-13 financial year. In the interim, HMRC will only undertake visits already booked, as well as follow-up visits to businesses already been identified as having seriously inadequate statutory records.

When the programme restarts, 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 records.

HMRC will use information gathered to identify businesses that require a BRC visit, reducing the need to visit compliant businesses. If the initial visit finds the records are seriously inadequate, a follow-up visit will take place, giving the business time to put their records in order.

If the records still demonstrate serious inadequacies at the follow-up visit, the business may be referred for a full tax return check. If that check uncovers inaccuracies linked back to poor records, a record-keeping penalty would be issued. A penalty could also be issued if the initial visit reveals there are no records or that these have been deliberately destroyed to prevent or frustrate the check.

HMRC’s Director of Local Compliance, Richard Summersgill, said: “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 records checks.

“The BRC visits provide benefits for the business and HMRC. We want businesses to pay the right amount of tax at the right time, avoiding potential interest and penalties.”

LINK: Information on record keeping