Business Records Checks on Ice

HMRC have temporarily postponed their Business Records Checks (BRCs) pilot scheme following the recommendations of an internal review which itself was based on discussions with professional bodies and trade organisations. The Revenue will now not make any new appointments to check small businesses records until early in the 2012/13 tax year so as to allow further consultation with representative bodies on the implementation of the recommendations in the review and on some details of the new approach.

BRC appointments that have already been made however will be go ahead as well as any follow up visits to businesses that have already been identified as having seriously inadequate records.

BRCs were announced in January 2011 and trialled earlier than expected in the April of that year. They include short face-to-face meetings and aim to put the record keeping of small and medium business enterprises on the right footing.  Up until 4th January of this year, 2,437 checks had been carried out, with 28% identifying record keeping issues and 11% warranting a follow up visit due to the seriousness deficiencies in their book-keeping. The number of checks falls short of the revised 6,000 visits HMRC expected to make in 2011/12.

HMRC are convinced that the BRC programme will give rise to more accurate tax returns and, in turn, help close the tax gap. The department does however acknowledge the need for a fresh approach to BRCs after reviewing its pilot programme and listening to the views of businesses and representative bodies. Part of this fresh approach should include a more flexible attitude by Revenue officials towards the quality of paperwork and not to impose a one size fits all standard on businesses of varying sizes.

The internal review laid down 16 recommendations some of which were as follows:

• Offer the possibility of a self-assessment questionnaire which could be sent back to HMRC to provide further information for their risk assessment and also let customers know that they might be chosen for a BRC visit.
• Define clearly what constitutes 'adequate' records.
• Improve record keeping education for businesses.
• Agree a reasonable penalty tariff for inadequate record keeping.

Whilst the move to postpone BRCs in favour of developing a more targeted approach is welcomed, this may not have been necessary had HMRC properly consulted back in 2010 before the scheme was launched.