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End of the road for 'Business Record Checks'

by Susie Hughes at 12:30 27/10/15 (News on Business)

HM Revenue and Customs' decision to scrap the controversial Business Record Checks (BRCs) has received a resounding welcome from practitioners, small firms and trade bodies.

Business Record Checks were a compliance procedure HMRC use when they want to confirm that a business was keeping sufficient information on its income and expenses to produce an accurate tax return. They began in November 2012. HMRC used risk profiling to identity businesses that might have poor records, then found out more about them in a telephone questionnaire and visited those where potential problems were indicated. However, there were concerns about the project from the beginning because it was difficult to identify high-risk cases and most of the businesses questioned or visited turned out to have adequate records. They were roundly criticised for being ineffective and poorly targeted. Over recent years, HMRC has scaled down BRCs and switched its emphasis to trying to kep smaller businesses maintain better records. Now, HMRC has announced they are stopping them completely in a message to professional bodies. Common sense The Chartered Institute of Taxation (CIOT) was among the groups welcoming the move. Andrew Gotch, Chairman of the CIOT's Owner Managed Business Sub-Committee, said: “This announcement is a victory for common sense. Advertisement “Tax advisers are strongly supportive of efforts to improve record keeping by business but, as HMRC themselves acknowledge, this initiative has not proved a cost-effective way of achieving the desired result. "Despite efforts by HMRC to identify businesses at ‘high risk’ of having inadequate records most of those they called on were found to be keeping records to an acceptable standard. The evidence is that records are being kept to an appropriate standard by most small businesses in the UK. “We hope this signifies a more realistic approach from HMRC to the perceived problem of small business record keeping. An educative approach, with initiatives such as HMRC’s online learning packages, is a much more sensible way forward in helping businesses keep adequate records to enable them to produce accurate tax returns when these are required." Essential The CIOT has warned business owners that keeping good records is still essential to enable them to produce accurate accounts and tax returns. Andrew Gotch said: “Scrapping Business Record Checks does not mean HMRC are going to get laxer on tax compliance by small business. It remains crucial for businesses of all sizes to keep records up to date and in good order. This is likely to become even more important as HMRC bring in digital tax accounts, which may require businesses to submit data more frequently.” Announcment HMRC’s latest announcement The full text of HMRC’s announcement in October 2015 says: “HMRC has decided to wind down the business records checks (BRC) initiative from today. “[We] would like to take this opportunity to thank you for your engagement with us over the last three years, which has been invaluable. Advertisement “BRC has positively encouraged businesses to keep better records, including updating them more frequently. As a result, most customers with inadequate records who have received follow up visits have improved their record-keeping to an acceptable standard. However, we have found that we were contacting more compliant customers than expected, because it has proved more difficult than originally anticipated to select those customers who would benefit from a visit. “HMRC remains committed to helping businesses to keep better records, and the BRC initiative has helped us better understand the risks and pressures that businesses face with record keeping. Using what we have learnt from BRC we are working to design a better approach to embed best practice into our routine compliance checks. We will continue to support businesses through our online learning packages and the investment we are making into digital tax accounts which will mean businesses can easily interface with HMRC from their own accounting software. “For customers this means: If they have received an initial letter from HMRC, they will still go through the phone questionnaire and will be advised whether, or not, a visit is to be arranged. HMRC will also provide a link for customers to obtain help and support on keeping business records from the HMRC internet site. If customers have been advised that a visit is required and has still to be arranged, the visit will be booked shortly. Where a visit has been booked or customers are awaiting a follow up visit then these will still continue.” Tweet -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2015

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