HMRC's new Business Record Checks underway

The taxman’s revamped approach to Business Record Checks is underway, with small firms in London first in line to sample the Revenue’s ‘improved’ process for tackling those with “inadequate” paperwork.

Under the revised BRC programme, firms suspected of keeping inadequate records will receive a letter in which Revenue & Customs will propose telephoning them to go through their records via a questionnaire. Firms in London will be targeted from November 26.

How the firm fares will depend on whether “no further action is required” or - if paperwork issues are identified - could benefit from “targeted self-help education,” or - if identified as at risk of having inadequate records, requires a BRC visit.

Spelling out these steps on its website, HMRC said its new approach to BRC from November 1st was a response to affected parties urging that the programme should be linked to “wider education and support activities.”

While similar appeals for guidance as to what constitutes ‘inadequate’ under the records probe has apparently resulted in a new guidelines in HMRC staff manuals, the educational aspect of BRC is being disbelieved by some.

“We continue to be extremely concerned that HMRC are creating an impression, wrongly in our view, that these records checks are mainly for educational purposes,” said the Low Incomes Tax Reform Group.

“It is critical that businesses understand that these are serious compliance checks with potentially large penalties being levied on those who keep poor business records.”

Although the HMRC landing page on BRC makes no mention of penalties, the prospect of ‘in-year’ fines for inadequate records remains, in that the department believes it can penalise firms before a tax return drawing on those records is submitted.

The Chartered Institute of Taxation reflected: “HMRC have still not provided a satisfactorily clear reasoning to justify their belief that they can charge penalties in-year…in our view it is questionable whether HMRC have the power to do this.”

However a consistent stance from Revenue & Customs is not on the institute’s wish-list for the checks which, after London and Anglia from November 26, will hit firms in the South East, Scotland and Northern Ireland (from Jan 14), Central England (Jan 21), the East, North Wales and North West (Jan 28) and South Wales and the South West (Feb 4).

In fact, the CIOT says that because it is “unrealistic” to expect the smallest firms to have perfect records written up every day, the taxman’s approach would hopefully be “appropriate” with “different kinds of businesses”.

Still, some firms seem more at risk of a BRC than others. CIOT president Patrick Stevens explained: “Since the selection process for BRC is based on risk assessment it is more likely that cash businesses will be chosen for BRC. Such businesses in particular will need to ensure they are keeping adequate records going forward.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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