HMRC jumping the gun on Business Records Check

The 28th February 2011 marked the end of HMRC’s consultation document, ‘Business Records Checks’ (BRC) and a summary of responses was due to be published at the end of March. HMRC previously stated that it was not their intention to begin a BRC with penalties for significant record keeping failures without first allowing a reasonable period of time for all to bring their records up to standard.

They also indicated that the BRC would begin in the second half of 2011. Despite this HMRC have already embarked on a pilot scheme of BRC of small and medium-sized businesses.

Letters have already been issued to some businesses by HMRC, seeking to arrange pre-return BRC under already existing powers. Whilst such letters do not make it clear that the BRC are part of a trial scheme only, HMRC have confirmed that the checks are being made on a ‘test and learn’ basis with no penalties. The department has apologised to the professional accountancy bodies for the lack of clarity prior to starting the pilot programme and the Institute of Chartered Accountants of England and Wales’ Tax Faculty is hoping to meet with Revenue officials to discuss concerns regarding the rapidity of the start of the checks. 

The pilot scheme is being tested in a limited way during the period 4th April – 15th July and will involve 30 HMRC staff in 8 locations; Edinburgh, Irvine, Manchester, Liverpool, Stockport, Sunderland, Sheffield and Portsmouth. It is estimated that up to 1,200 visits will take place during the trial period.

Whilst the trial visits are predominantly for the benefit of HMRC, should any contractor be the subject of one of these visits then they should co-operate with the Revenue as the checks are being made under the existing powers of Schedule 36 Finance Act 2008. A person can refuse entry to HMRC without incurring a penalty provided the visit has not been authorised by a Tribunal. Anyone considering such a tactic should:

Check with the HMRC officer whether the visit has Tribunal support;
Check the impact of such action on their Tax Enquiry Insurance policy with their insurers; and
Consider whether or not their risk profile would be heightened.

HMRC believe the additional burdens of time and cost placed upon businesses by the pilot BRC are outweighed by the legacy of establishing good record keeping practices.


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