Last year HMRC devised and began testing a new compliance procedure – Business Records Checks (BRCs). The aim was to visit smaller businesses and identify those that are not keeping adequate records. However, professional bodies including ICAEW had serious concerns about the process, and in the face of these HMRC suspended BRCs in order to consult and have a re-think.

 

HMRC has now announced that BRCs will be re-launched from 1 November 2012. Professional bodies have spent a considerable amount of time in the interim trying to agree a sensible approach with HMRC. Since there was a clear Government policy drive to introduce BRCs, scrapping the whole idea was never an option. However, it is believed the process that HMRC now intends to adopt is more generally acceptable and not too intrusive. While this is HMRC’s process, not a jointly-agreed one, HMRC has taken account of a number of comments and concerns.

 

The roll-out of BRCs will be done region by region, over a 14-week period beginning on 1 November 2012 and ending early in 2013. This is not a recommencement of the pilot but a full roll-out of the BRC process.

If you receive a letter from HMRC then contact us immediately. We will deal with it before they make the phone call to you. If you receive a call then refer them to us rather than answering their questions. HMRC might be resistant but just insist that they must speak to us- it is understood this procedure is agreed but everyone is new to it and we are already aware of a case where an individual HMRC officer was not be aware of the procedures.

The BRC four-stage process

 

1. The first stage is that HMRC’s computer-driven risk analysis produces a list of cases for possible BRCs. BRCs will therefore only be targeted at businesses where HMRC perceives some risk that records may be inadequate. Staff in local offices will not be able to add to this list.

 

2. An HMRC Compliance Centre will write to those on the list saying that they are being considered for a BRC and that the writer will phone them a week later to ask a few questions. There are about 15 questions and these would be best answered by us so make sure you let us know immediately if you receive a letter so we can call them instead. HMRC thinks that its questions can identify who is likely to need a BRC. Most of those phoned will not get one. Some may be offered support and advice on keeping records. The minority will get a visit.  It would be sensible for us to be at any visit.

 

3. A BRC visit is not intended to identify whether the records are good or even reasonable – their focus is on whether or not they provide a sound basis to ensure that all income is included on tax returns. If HMRC thinks that the records are inadequate the officer will explain at the visit why he or she thinks so. Agreement might be reached at the visit but if not there are informal appeal routes through another HMRC official.

 

4. If it is accepted that the records are inadequate HMRC will make a further visit around three months later to check that changes have been introduced and that these meet its concerns. If no changes have been made, or the changes are clearly not going to satisfy the concerns, HMRC will consider imposing a record-keeping failure penalty at that stage. This will normally be £500.

 

Penalties

As noted, there will only be penalty where the records are inadequate and remain inadequate at the follow-up visit. The penalty will be £500 for the first offence, though for businesses in their first year of trading it will be £250. If during the BRC HMRC finds that records have been deliberately destroyed, a penalty of £3,000 would apply.

Information provided by the ICAEW

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HOT ISSUE:   BUSINESS RECORDS CHECKS
Status:                      “Closed item” (no updates expected)