Watson Buckle Blog

HMRC to continue controversial records checks scheme

The controversial Business Record Checks Scheme has once again reared its head with the news that even accountants themselves are not immune to a visit from inspectors.

At the start of the month, businesses were warned that HM Revenue and Customs looks likely to continue with its target to carry out 12,000 BRCs by April.

For those who are unaware, these checks entail HMRC reviewing the quality of businesses’ records in real time, even before a tax return has been submitted.

It even has the power to charge companies up to £3,000 if their record keeping is not up to standard.

HMRC announced before Christmas that it was reviewing the scheme following criticism that it was unfairly targeting small businesses.

It said it will: “examine whether the current approach is the best way of achieving the policy objectives, and will identify what changes are needed to ensure that the objectives are achieved.”

However, it is understood that HMRC’s BRC team has not been instructed to cut down on the number of visits.

The scheme has been roundly criticised, with a panel of MPs saying the attitude of HMRC towards small businesses in a time of hardship is “disgraceful” when large firms are getting off without paying millions in tax liabilities.

In recent months HMRC's approach to small business record check has undergone a subtle change from being an education exercise to a compliance check.

In letters sent to businesses as part of a pilot, HMRC recommended areas of improvement for record keeping and informed the companies that they might receive visits within three months to check the improvements have been made.

It was initially understood that the underlying theme was informed education, but this has now turned into compliance with many businesses being issued with penalties without receiving first warnings or being given time to make improvements.

Here are some tips on how businesses can prepare for a Business Records Check:

  • Avoid one in the first place. Taxpayers with late or provisional tax returns or late tax payments are considered by HMRC to be more risky and therefore more likely to need a BRC.
  • Always discuss with your accountant as soon as you are notified by HMRC, don’t rely on HMRC informing your adviser.
  • Consult this useful checklist at Business Link www. Which you can use to quickly assess how good your records are and make recommendations
  • Consider whether there are tasks that should be up to date but are not. For example, if you are a company have you made sure you have the appropriate board minutes and dividend vouchers for dividends paid?