HMRC re-launches Business Records Checks

HMRC will start targeting businesses across the country later this month as it rolls out a new "fresh approach" to Business Records Checks (BRC) visits.

As of 26 November HMRC will start visiting small and medium-sized businesses in London and East Anglia to check their records.

The visits take place over a 14-week period, ending up in South Wales and the South West in February 2013.

Continued...

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I'd bet the reality....    1 thanks

Trevor Scott | | Permalink

... will be a variety of loaded or confusing questions (I'd bet some will have nothing to do with record keeping) designed to justify an enquiry or an assessment, with any failure to follow HMRC's wishes being treat as another opportunity to threaten and intimidate taxpayers.

 

Better to advise clients to avoid such telephone conversations, just asking HMRC to contact their agent....saying goodbye and then ending the call.

.

ireallyshouldkn... | | Permalink

@Trevor that's my standing instruction to all my clients!

Good of them to do this at our peak time of year. 

To be fair to HMRC given they are presumably just guessing how might have poor records and who doesn't (how will can they tell from a tax return???), its a sensible approach to try and pre-screen but I imagine all they are going to end up with is either really honest people who wont give the answer HMRC want to hear,  the ones that didn't understand the question, and the ones for whom the question makes no sense for their type of business so gives the 'wrong' answer. Ie "did you do a stock take" for a chip shop.....

 

Not sure    2 thanks

asking | | Permalink

avoiding the call will help at all, they might then decide to visit anyway and waste half a day of your clients time as opposed to a 10 min call.

Taking the figures from the pilot, only around 1/3rd were visited which suggests the questions were to the point and not designed to justify an enquiry or assessment doesnt it?

johnjenkins's picture

Big old fishing trip    2 thanks

johnjenkins | | Permalink

I wonder if we will be able to ask what credentials these people will have to allow them to advise on record keeping, and in fact whether we can turn round and say - no way sunshine unless you open an investigation.

Uncanny really as at the "agent strategy" seminar HMRC said they weren't competant enough to check clients records.

Good record keeping?

The Rogue | | Permalink

Of course, if a business's records are not up to scratch then HMR&C should be able to insist it is put right.  Apart from anything else inspections etc must be easier and quicker if the records are in order.  I have no idea how they can decide in the first place which businesses are more likely to have problems in order to target their initial contacts.  Perhaps they should check out every business on, say, a five yearly cycle.

If a business's records are a boat load of receipts in a shoe box then I don't think that it requires any qualfication on the part of the HMR&C representative to identify this as not up to scratch.

HMRC re-launches Business Records Checks    1 thanks

coverack | | Permalink

“We should be prepared to speak to appropriately nominated agents or representatives if customers feel that would give us a better view of the adequacy of their records.” ( extract from HMRC’s Business Records Check Review, para 3.75).  First things first please, HMRC!  You know which taxpayers have agents representing them and which don’t, so your first point of contact should be an agent, or at the very least you should copy an agent in via the opening letter.

(Given the whiff of fishing expeditions pointed up by some commentators, I shall make time to identify someone at HMRC to get this issue of agent-involvement clarified - Coverack)

Record keeping    1 thanks

allan613 | | Permalink

Many years ago I told an Inspector that if he were to be in the real world of business he would survive five minutes with all his 'good advice' on book-keeping etc. he was giving to my client (who was a taxi driver).

The advice included writing everything in a book every time he stopped so he would know his income and expenditure immediately. The client looked at him as though he had come from another planet!

We came to an agreement - my client and I would stick to the book-keeping and accounts side, and he would stick to the tax side.

We ended up shaking hands as good friends

johnjenkins's picture

Now we are in

johnjenkins | | Permalink

a different area. "up to scratch". We all know what records we would like to see but a bag full of income and expenditure receipts, to me are adequate records. Obviously further explanations may be needed, but if they are proved correct I don't see how HMRC can say they are not adequate.

I suspect inadequate in their eyes are records that allow them to issue penalties galore.

Adequate Records    1 thanks

acountancy.lind... | | Permalink

 

I do think that all HMRC employees who are engaged in examining clients' records should  as part of their training be required to spend some time working in an accountant's office so they have experience of what records we receive and how we process them. There's no reason why the shoe box or plastic bag should not contain adequate records.

In the 1970's HMRC used to select client's for a "quick" examination. As a tax manager I got involved in several. I think there is a lot to be said for reverting to this. Other practitioners might not agree!!

pembo's picture

on point of interest    1 thanks

pembo | | Permalink

anyone know if there is a separate statutory point of reference for their right to do this or it is implicitly contained within the general business inpection legislation ? Or then again are they once more making up the rules as they go ?

After the missing data disc fiasco et al under Dave Hartnetts regime this holier than thou postering starts to grate. Pot  kettle and own house first are just some thoughts that spring to mind.  

coolmanwithbeard's picture

What counts as adequate?

coolmanwithbeard | | Permalink

I have clients that put all takings (as evidenced by till rolls) in the bank and pay all bills from the bank and write no records. I have no issues with the accounts we produce for them but would they be adequate? Would "better" bookeeping result in different accounts?

 

Or the clients that use say QuickBooks - will hmrc be experts in this so they can see the records being kept? Should the client allow them anywhere near their pc? If done wrong computerised records can look impressive and be wholly inadequate.

I know my clients and we agree their record keeping based on a number of factors - which includes what they are prepared to do. The then choose to pay me more or less by giving me better or worse records. I am doing a professional job and there are only a few clients whose records are wholly inaccurate to the point of being misleading or hiding profit.

 

Finally some really good looking records only show half the takings will hmrc spot that? I only spot it when I compare GPP year on year.

HMRC record Keeping    1 thanks

Shay Daly | | Permalink

Colleagues beware.

The Revenue always deem records of a cash business as being inadequate to start with.This is because there is no third party proof that the amount recorded is the full sum received.In many trading situations the cash received can only be verified as satisfactory in HMRC view if a receipt is issued to the customer.How many receipts does your local chippy issue??????

With e-filing there will be more Revenue "programs"like this

JAADAMS's picture

Has everyone noticed the dates?    1 thanks

JAADAMS | | Permalink

Further proof is any is needed that HMRC do not live in the 'real' world. The dates are all January - our busiest time.

Be prepared for phone calls from distressed clients as well as up until midnight preparing and submitting Tax returns.

 

johnjenkins's picture

The answer to that is simple    1 thanks

johnjenkins | | Permalink

Sorry too busy, come back in february. HMRC cannot actually make you comply to a time of their choice. It has to be mutual. I'm just wondering what they would do if you say, sorry you haven't opened an investigation so go away.

mr. mischief's picture

Good idea

mr. mischief | | Permalink

After all, HMRC are only too glad to say "Sorry we are too busy" and hang up on you after 20 minutes on the phone!

If the HMRC posters on various sites I frequent are anything to go by, most of their staff haven't got the faintest clue what it's like to run a business, and it follows from that they haven't got a clue what are adequate records either.

What they probably do have is a piece of paper with a whole load of boxes to tick.  Our mission - should we choose to accept it - is to get the majority of those boxes ticked at the first attempt and never hear from them again.

waste of resources

Ian McTernan CTA | | Permalink

I can't see HMRC giving up the opportunity of opening an enquiry into anyone they have deemed to keep 'inadequate records', especially if a fine is imposed (will make for an interesting Tribunal case as to the definition of 'adequate' in any particular case).

Adequate is what is necessary for me to complete accounts on my clients' behalf to give a 'true and fair view'.  Some of the suggestions I have heard from HMRC as to how clients should keep their records show they are completely divorced from reality.

Having had an 'enquiry officer' refuse a motoring expenses claim on a decorator's car despite photographic evidence showing it being used (it was a Mercedes..which ruled it out in their opinion)(we won eventually when they dropped the case), I have no faith at all that people who have no experience of running a business and seem to think we all have all the time in the world to make sure we keep perfect records will have the necessary judgement as to what constitutes 'adequate'.

Much better to use these resources and open more enquiries straight away- but then their %age of cases yielding tax revenue might drop and that would never do!

Low Hanging Fruit    1 thanks

penpusher | | Permalink

It seems to me that HMRC are more interested in going for the usual suspects, the disorganized, mainly cash run businesses that more than likely are run by honest, middle income sole traders rather than going for big businesses where the rewards would be rather more fruitful.  However, big businesses would have their own full time staff ensuring that they manipulate the system to maximize there tax avoidance (or is it tax evasion) strategies and would probably run rings around the lowly tax official.  Obviously the HMRC, and ultimately the government, have little interest in upsetting that particular apple cart.

Proper accounting records?

The Black Knight | | Permalink

The Rogue wrote:

If a business's records are a boat load of receipts in a shoe box then I don't think that it requires any qualfication on the part of the HMR&C representative to identify this as not up to scratch.

to the contrary some businesses do operate this way! where does it say the records have to be up to date or even written up until required.

Unless it's a company of course.

And then various parts of the accounting records gap are completed by the accountants working papers.

most of HMRC do not understand accounts or what is or is not compliant. HMRC readily accept obviously incorrect company accounts.Where substantial amounts of tax are missing.

They simply do not have the skills available.

for sure it is going to be fun.....but a waste of every ones time and resources.

But they already know this! that's why it is being rolled out in time for January!

 

 

Proper Accounting Records    1 thanks

The Rogue | | Permalink

I understand that we are living in the real world where shoeboxes of receipts are what people have and it is down to an accountant to work out some sense from them.  Thus there is a large danger of missing out income and/or expenses.  But should it be like this?  Just how difficult is it for someone to make a list of what has happened each day or each week?  If someone wants to run a business they need to develop certain skills and simple (very simple) book keeping could be one of these.

HMRC re-launches Business Records Checks

coverack | | Permalink

Are any of the points, whacky or otherwise, being raised by Accounting Web with HMRC, or are they just to fester unresolved.  I should like Accounting Web to take its role forward and alert its subscribers to how they propose dealing with the concerns that have been raised & what HMRC’s response is.

Since the withdrawal of the “Working Together” routine, agents have had no alternative but to ferret around on their own for the most recent HMRC positions on a variety of issues, and this is simply not good enough.

Can Accounting Web please go some distance towards filling this gap?

johnjenkins's picture

Does it really    1 thanks

johnjenkins | | Permalink

make any difference who makes representation to HMRC? They will do what they want anyway. Government says we need more money, HMRC devises ways of getting it. Tax Payers get fed up with it and pay Accountants/lawyers etc. to come up with deferring or avoiding, and so the circle continues.

AnnaKournikovasKnickers's picture

Self employed business records check

AnnaKournikovas... | | Permalink

As Dirty Harry says "do ya feel lucky punk?" Try:'what  self-employed - me? Shum Mishtake Shooli'

 

HMRC Business Records Checks

coverack | | Permalink

The last two comments are pretty negative - it's not beyond the bounds of possibility for a courteous, firm and informed approach to be made to HMRC on this and other issues that arise from time to time.  Our client-taxpayers are entitled to expect us not to lie down and expose the throat

johnjenkins's picture

Our negativity

johnjenkins | | Permalink

comes from years of trying to make HMRC see common sense. Just look at working together and the office of tax simplification and ask yourself what have they really achieved?

Remember the song War, well replace that with HMRC "what is it good for - absolutely nothing"

Don't get me wrong I am not having a pop at the people who try and make the system workable, it is successive governments who have totally destroyed anything workable between the business world and HMRC.

What's happened to Agent Strategy and all the good that was supposed to bring? and so it goes on.

pembo's picture

negativity

pembo | | Permalink

Think most of us who have been in this game over 30 years wouldn't mind these sort of things so much if HMRC cut people a bit a slack. Accountancy and tax is not a precise science but people generally do their best and like all of us screw up sometimes. Even whisper it HMRC although to listen to their holier than thou mantras you wouldn't guess.

Being an old fart I've been banging on for as long as I can remember that this sort of stand off would be the inevitable end product of the ever increasing depersonalisation of the entire system. Computers are brilliant when things go OK but heaven help you if theres a problem. The huge dent in the wall by my desk bears testament to this inevitability.

Can accountant take call from HMRC?

retropunk | | Permalink

We have just had a letter from HMRC advising we have been chosen for one of these Business Records Check, and HMRC will telephone on a certain day.  Can our accountant speak to them, or accounts person, or does it have to be the business owner? Any advice on the type of general questions they are likely to ask?

As most small businesses, we keep records, receipts to the best of our ability, and send to our accountant to prepare the tax return.  We have a very small online business and one day a week market stall.  We are nervous that we might say something wrong, or not understand and so be subjected to a HMRC visit.  We feel we have nothing to hide, but of course, you can't help but be worried, as you hear so many awful stories about how traumatic it can be for sole traders being picked on. 

 

 

 

 

johnjenkins's picture

Just tell them the truth    1 thanks

johnjenkins | | Permalink

when they phone. Give them your Accountants phone number. Certainly copy the letter to your Accountant

Yes they will ask searching questions designed to find out wether it will be worth them coming for a visit. If they don't think they will get anything (undeclared income etc.) then they won't bother visiting. They are not interested if you keep good records only if they can get extra money out of you.

HMRC visit

retropunk | | Permalink

After talking to me or accountant, they then decide it is worth a visit, does the mean the meeting has to be held at the house or can I insist it be at the accountants? (as business address is home i.e. I am sole trader).  

thanks

coolmanwithbeard's picture

Visits    1 thanks

coolmanwithbeard | | Permalink

THey would want to visit you at home but will only enter the parts of the property used for business - I work from an upstairs room so that's unlikely!!  THey will happily look at your records somewhere else suitable (your accountant's office of one of their offices (if you can find one still open for "customers")

 

THis link to a factsheet might help further http://www.hmrc.gov.uk/compliance/cc-fs3.pdf

 

Mike

johnjenkins's picture

As HMRC are only checking the records

johnjenkins | | Permalink

then they can be sent for inspection.

Although HMRC like to meet there is no obligation and everything can be done by letter.

Sometimes it is easier to have a meeting, but you have to be in control and recognise questions that don't actually mean anything. These questions are 2 to the dozen in a PAYE visit especially when HMRC are trying to re-classify subcontractors.

Keep it simple and don't go into how you do your analysis or other thoughts on how you run your business.

 

Having an accountant/agent

Mmoneypennyy007 | | Permalink

Having an accountant/agent/representative answer on your behalf automatically gives you more than 2/3 of the score needed to bump you to visit level. Fact. Revenue are scoring differently for taxpayers not answering the questions themselves.

Business Records Checks

coverack | | Permalink

This exchange of views is becoming increasingly lop-sided, bilious & unhelpful -

AGENTS - identify an HMRC officer that you feel you can talk to/remind about your role - already sanctified by them - as the client's representative;

TAXPAYER - confirm your agent's role and, if necessary, require him or her to continue as such.

A much better way to get through this issue, n'est-ce pas?

 

Has anyone else had this??

Oppco | | Permalink

I've just completed a BRC questionnaire phone call on behalf of a client.

HMRC told me that as the client himself did not speak to them, he would now receive a visit and that this was their policy for all taxpayers who asked their accountants to call on their behalf

johnjenkins's picture

@coverack

johnjenkins | | Permalink

Problem is HMRC are looking for ways of getting more money into the coffers. The officers involved aren't the people making up the questions. So you end up with a biased enquiry.

@oppco that's quite frankly a

ireallyshouldkn... | | Permalink

@oppco that's quite frankly a staggeringly arrogant attitude on behalf of HMRC

I would make sure that you direct them to your offices and not to your client's premises. Ie if they are playing silly buggers, play the game with them.

 

I must admit to have been a

Oppco | | Permalink

I must admit to have been a bit surprised! Yes, we will insist the visit is to be here and outside of my client's normal working hours.

There is a sea change happening within HMRC

mr. mischief's picture

conference call

mr. mischief | | Permalink

Good tip.  If I get any of these I'll make sure the client call is a conference call with me alongside my client having given him or her 10 minutes of coaching beforehand!

johnjenkins's picture

I would presume

johnjenkins | | Permalink

at this stage there is no official enquiry so HMRC only need to see the business records, not the source documents. If you're on sage and you tell them, why would they want to then come out and check the records? Indeed could you then say no and see what developes. Methinks this record checking business is a way round opening an enquiry.

Having an accountant/agent

coverack | | Permalink

You seem pretty confident - how do you know this "fact"?
 

johnjenkins's picture

@coverack

johnjenkins | | Permalink

you can tell by the way they are asking the questions and their faces when they know the question is ludicrous. They will always say at the beginning that not all the questions may apply to you.In fact some of the officers don't even want to ask the questions.

Scripted questions asked by

Mmoneypennyy007 | | Permalink

Scripted questions asked by officers who have no knowledge whatsoever of running a business. Computer generates a score giving an outcome which is manipulated to suit how many visits need to take place in the coming weeks. Give the same answers one week as the next will not always give the same outcome! Shambles.

One point of interest arising

Oppco | | Permalink

One point of interest arising out of my BRC conversation with HMRC was that they wanted to know how my client worked out private use add backs for mixed use expenses, telephone and so on.

That would not appear to be a 'questionnaire' type of question, so I may have had the misfortune to have someone who knows about tax at the other end of the phone.

The HMRC  man kept saying 'I know you know the rules, we want to find out if your client does'. You can't discuss anything or argue with HMRC, it's like talking to a robot every time

 

 

Invite them out for a visit

The Black Knight | | Permalink

Invite them out for a visit anyway so they can see for themselves. I suspect they will argue the opposite then.

YES

The Black Knight | | Permalink

Oppco wrote:

One point of interest arising out of my BRC conversation with HMRC was that they wanted to know how my client worked out private use add backs for mixed use expenses, telephone and so on.

That would not appear to be a 'questionnaire' type of question, so I may have had the misfortune to have someone who knows about tax at the other end of the phone.

The HMRC  man kept saying 'I know you know the rules, we want to find out if your client does'. You can't discuss anything or argue with HMRC, it's like talking to a robot every time

The answer is at the end of the year when the tax return is done....are you making an enquiry into a return or checking whether sufficient records are being kept to enable the correct entries on the return.

I expect your clients answers to the misunderstanding of the question will be quoted back to you in the enquiry.

johnjenkins's picture

It may not

johnjenkins | | Permalink

appear a scripted question but you can be sure it is and there will be a lot more of those types of questions, which have nothing to do with keeping adequate records from our point of view.

So now we know that HMRC aren't really looking at if you're on sage or spreadsheet or why. They are interested in what you put where and why. What's more they are looking for the fact that the client knows where everything goes and it's not an accounting adjustment at the end of the year.

As usual HMRC will overstep the mark and demand "penalties" or at the very least try to get the accounts altered. These sort of things won't be settled until someone goes to tribunal.

Investigation by the back door.

I agree John

The Black Knight | | Permalink

johnjenkins wrote:

Investigation by the back door.

Either have an enquiry process or not. I expect its a way of keeping appalling enquiry selection and results "off balance sheet" so to speak.

more Spin....It will be too late by the time someone realises they could have fixed the problem rather than brushing it under the carpet.

.

ireallyshouldkn... | | Permalink

@oppco those questions sound like those that arise when speaking to the P11D mafia trying to reinforce rules you already know.  Pointless exercise all round, and all you do is give them what they want to hear, you don't at any point stop to find out whats really happening!

YES

coverack | | Permalink

You would have had better luck with your HMRC man – and a more satisfactory outcome to the conversation – if you had dealt with the issue as follows:

HMRC: “I know you know the rules, we want to find out if your client does”

 

YOU: “In the same way as I leave the nuances of window-cleaning to my client (his self-employed business for many years), he leaves the nuances of accurate accounting & tax rules to me (my profession for many years).  That’s what he pays me for.  Maybe take another look at the original Agent Authorisation paperwork that you have on file.”  

johnjenkins's picture

Should the client

johnjenkins | | Permalink

know or shouldn't the client know? We all know how to clean windows, but should we be made to clean them ourselves? Perhaps HMRC are trying to push the idea that all tax payers should do their accounts and tax returns themselves so no need for Accountants. Or perhaps those business with under VAT threshold. Then they could really stamp their authority.

Or

The Rogue | | Permalink

Perhaps HMR&C want every tax payer to do their own accounts and get them right which means that after the Accountants have been forced out of their jobs there will be no need for HMR&C inspectors either?  Do you think the inspectors have figured this one out yet?

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