HMRC agrees to rethink business record checks

A detailed review of the contentious Business Record Check programme – under which small firms can be fined up to £3,000 for lax paperwork – is officially underway, HM Revenue & Customs announced.

Bowing to “considerable concern” about the spot-checking initiative, HMRC said it had started a strategic rethink of BRC, in consultation with the professional bodies critical of its implementation.

Although the programme will not be suspended, meaning the previously announced pilot exercises are ongoing, most tax advisors say the onus is on the Revenue to show BRCs can achieve “something sensible”.  

Partly, explains tax expert Nichola Ross-Martin, this is because the tax bodies called to consult currently enjoy ministerial support under a separate initiative to improve HMRC’s efficiency.

But it’s also because they believe the BRC approach is not the best way to help small and mid-sized firms keep good records – the initial aim of the programme, reminded the Institute of Chartered Accountants of England and Wales.

Its tax faculty said: “We are concerned that HMRC may set unrealistic criteria for small business records and that BRCs will place a considerable compliance burden on SMEs and their advisers.”

Also issued by business groups, such BRC-related concerns - extending to its legality, its scope to impose financial penalties and its seemingly rushed consultation, date back to March 2011. 

In a statement released just before New Year (of 2012), HMRC admitted it hadn’t got everything right, saying the programme would have indeed “benefitted from more detailed consultation at an earlier stage.”

Cue the new strategic review with industry, designed to consider the overall aim of BRCs and to examine whether the Revenue’s existing approach is optimal for tackling poor record-keeping in the smaller business sector.

In terms of the penalties for those whose records are found to be inaccurate, the tax authority added: “HMRC would like to take this opportunity to reassure taxpayers and agents that HMRC will not (except in extreme cases such as where a taxpayer has no records or has destroyed them) be seeking to use the record-keeping penalty provision during the pilots. No such cases have been identified so far.”