Contractors’ Questions: Are HMRC’s business records checks underway?

Contractor’s Question:  I’ve heard that HM Revenue & Customs has started its programme on checking business records, but without having responded to concern about the initiative and the powers within. So are these spot-checks now in full swing so soon after the consultation, and what can I expect if I’m approached by HMRC under the BRC programme?

Expert’s Answer: HMRC has started (subsequent to the closing date for the consultation) a pilot exercise on a small number of cases. They describe the pilot as Test and Learn, which is probably a better description as it is intended to try out what a BRC visit might entail.

These trial visits are taking place in only 8 locations (Edinburgh, Irvine, Manchester, Liverpool, Stockport, Sunderland, Sheffield and Portsmouth), between 4 April and 15 July 2011.  It is estimated by HMRC that up to 1,200 BRC visits will be undertaken in this period (Ed: although some reports claim the actual figure will be 1,800). HMRC are carrying out Business Record checks under their existing powers (in Schedule 36, FA 2008); they do not have any new powers in relation to such checks.

And the BRC does not insist on a specified format for keeping business records, but the records should be appropriate for the size and nature of the trade. Also according to an update from HMRC, posted on April 12, HMRC has no intention of charging penalties during the current phase of testing.

The update adds: “HMRC understands concerns around the additional burden placed on businesses by the introduction of the BRC initiative, but expects that additional burden, in terms of time and cost, to be outweighed by the long term benefits for businesses of having good record keeping routines in place.

“HMRC would also like to confirm that it has no intention of charging any penalties for record keeping failures during the current phase of testing and continues to review its long-term planning around the introduction of such a charge in the future.”

In the meantime, HMRC is considering the responses to the consultation. By mid-July 2011 they expect to be able to bring together the consultation responses and the results of their Test and Learn trials.

The tax authority said: “HMRC intends to continue to work together with agent bodies on improving record keeping by businesses and the risks involved in businesses applying poor record keeping procedures. Within this context HMRC will continue to speak to agent and business representatives on the development of BRC during and after the current testing phase.”

Expert’s Answer based on commentary by the Tax Faculty at the Institute of Chartered Accountants in England & Wales.


Editor's Note: further reading:

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