Here We Go Again - Business Records Checks Resume

In February I wrote about HMRC's postponement of their controversial and ill thought out business records check scheme.

The postponement is now over, and the revamped scheme is being relaunched. HMRC will not just be sending letters but also calling SME's on the phone, if the phone call produces an "unsatisfactory" response then HMRC will be showing up on the doorstep.

As per HMRC:

"Businesses need to keep adequate business records so that they can complete their tax returns correctly.

A pilot programme of Business Records Checks (BRC) began in April 2011. This involved checks by HMRC on the adequacy of Small and Medium-sized Enterprises' (SMEs) statutory business records. SMEs are businesses with an annual turnover below £30 million who employ less than 250 people.

Up until 17 February 2012, 3,431 BRC had been carried out. These found that 36 per cent of businesses had some issue with their record-keeping of which 10 per cent had issues serious enough to warrant a follow up visit.

Following a review, HMRC announced a fresh approach to its pilot BRC programme on 3 February 2012.

The review of the pilot programme, which included discussions with trade and professional bodies' representatives, found clear evidence that the programme was effective in improving record-keeping practices amongst SMEs. However, it recommended that the checks were better targeted in future, and linked to wider education and support activities.

In order to implement the review's recommendations all new BRC activity was paused from 3 February to 31 October 2012 to allow HMRC to redesign the BRC process.

Read the full report of the Business Records Checks Review (PDF 145K)

Overview of new approach to BRC

A new approach to BRC started on 1 November 2012. Customers who are more likely to be at risk of having inadequate records will be contacted by letter to arrange for HMRC to call them to go through a short questionnaire.

Depending on the outcome of this call, HMRC will confirm to some customers that no further action is required. Where some issues are identified, customers will be offered targeted self-help education options. Customers who are assessed as being at risk of keeping inadequate records will be referred for a BRC visit.

Useful Information

Business Records Checks"

HMRC have also issued a press release about the scheme which outlines the regional timetable for implementation of the scheme:

"Business Records Checks are being re-launched by HM Revenue and Customs (HMRC) today, following a review and extensive stakeholder consultation.

The substantially redesigned Business Records Checks programme now involves a new step-by-step approach, with a much greater emphasis on education and support.

Businesses need to keep records which can clearly demonstrate they are meeting their tax responsibilities. From today, HMRC will send letters to businesses it believes may be at risk of keeping inadequate records, advising the business that HMRC will be phoning them to discuss their business records. This call will then take the customer through a set of questions to assess the customer’s record-keeping affairs. Depending on the outcome of this conversation, HMRC will then determine whether the customer could benefit from tailored educational support and whether a Business Records Checks visit is necessary.

Where a visit reveals the customer is keeping inadequate records, HMRC will provide guidance on what the customer needs to do to improve their record keeping. HMRC will then arrange a follow up visit, normally three months later, giving the business a reasonable time to make the necessary improvements to their record-keeping processes. If, on the second visit, the records have not improved to an adequate standard, then HMRC may charge a penalty.

The Business Records Checks programme will be rolled-out, region by region, over a 14-week period. The planned timetable for visits to re-commence is as follows:

• London & Anglia – 26 November 2012

• South East England – 14 January 2013

• Scotland – 14 January 2013

• Northern Ireland – 14 January 2013

• Central England – 21 January 2013

• East of England – 28 January 2013

• North Wales & the North West of England – 28 January 2013

• South Wales & the South West of England – 4 February 2013

HMRC’s Director of Local Compliance, Richard Summersgill, said:

“We’ve listened to businesses and agents, and revamped our Business Records Checks programme to make it more streamlined, targeted and better focused on education.

“The visits offer benefits for businesses at risk of keeping inadequate records. Adequate records help businesses pay the right amount of tax at the right time, thereby avoiding interest and penalties for errors and late payment, whilst also giving HMRC greater assurance when a business submits its tax returns.”

Notes to editors1. A pilot programme of business records checks began in April 2011. Up until 17 February 2012, 3,431 business records checks had been carried out on the records of small business customers. These checks found that 36 per cent of businesses visited had some issue with their record keeping, with 10 per cent of all businesses visited having issues serious enough to warrant a follow-up visit. Where follow up visits were undertaken, it was found that the majority of these customers had improved their record-keeping affairs – indicating a Business Records Checks visit did have a positive effect on customers’ record-keeping.

2. On 3 February 2012, HMRC announced it would be taking a fresh approach to its Business Records Checks programme, following a review. (See HMRC news release NAT 10/12 for more information.)

3. For further information on record-keeping visit www.hmrc.gov.uk/record-keeping

4. Follow HMRC on Twitter @HMRCgovuk"

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