Business Records Check letter

Business Records Check letter

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I have had a client receive a Business Records Check letter (my first to get one), who is a therapist, who banks all receipts including cash, and whom I believe to be totally compliant. Should I call HMRC, or leave it to him to do so?  I believe that I may not have all the answers to every question that they may ask.

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By refs8
24th Apr 2013 13:21

Me too

I would be interested to know also, how to handle this as we too received a telephone call this morning.

A normal tax enquiry we would do by correspondence only and are wondering what legal right HMRC have to ask these questions over the telephone to the client or as accountants?

I am sure like most professionals trust is at an all time low with HMRC departments

 

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By johngroganjga
24th Apr 2013 13:45

I would want to be present if one of my clients was undergoing one of these checks. .

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By refs8
24th Apr 2013 13:50

The point is they are done over the phone.............!!

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Replying to Ruddles:
By johngroganjga
24th Apr 2013 14:02

Telephone

refs8 wrote:

The point is they are done over the phone.............!!

I was aware that at least some were.  If they all are so be it.  But I would want to be present either way - in a conference call if done by telephone.  Would not want a client misunderstanding a question, or putting his foot in it, without opportunity for immediate clarification and mitigation.  Also I would not trust HMRC to record or report what client said to them accurately .

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By DMGbus
24th Apr 2013 14:01

Recommended practice

Be present with the client when THEY 'phone HMRC and receive / answer the questions.

A telephone with a loud speaker is best.

Both accountant and client then hear the question and client can be advised how to reply (as in using correct words to give a truthful answer rather than inadvisable words to do the same).

The client might not understand the question, so having their accountant present to "translate" the question is helpful and positive.

 

 

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By Roger.Thornton
24th Apr 2013 14:02

Stock answer

Sorry we do not give out information over the telephone, Please put your questions in writing and they will be answered after proper consideration. I have used exactly the same line during a face to face interview. You are NOT refusing to cooperate, indeed you are going out of your way to ensure that they get a full and properly considered, researched, and documented accurate response.  I'm always dubious about "off the cuff" responses as they can be inaccurate, and more importantly misrepresented by HMRC.

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By refs8
24th Apr 2013 14:09

Roger - I like

Thanks Roger - I like that answer and that is the line I am going to go down - I think

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By Roland195
24th Apr 2013 15:22

Purely supposition

The format of the business compliance checks seem to be designed to cut the agent out. I am not sure exactly how you would deal with the telphone call other than wait for a question, mute the speaker, tell client what to say then have client say it. While this will certainly reduce the chance of the client saying something incriminating, it must frustrate HMRC (who possibly feel they have walked into a Law & Order episode).

Is there a danger that this will provoke HMRC into feeling that something is being hidden?  

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Replying to lesrobinson:
By Roger.Thornton
24th Apr 2013 15:47

The right to be professionally represented

Roland195 wrote:

The format of the business compliance checks seem to be designed to cut the agent out.

 

Exactly. This is a deliberate ploy by HMRC.

However, all taxpayers have a legal right to be represented and should simply say to HMRC that they have authorised their accountant to deal with HMRC on their behalf and that HMRC should therefore speak to the accountant.

The client should then terminate the call.

Train your clients, they NEVER, EVER, under ANY circumstances, discuss anything with HMRC.  We make it very clear that any client who does so is on his own, and we will charge in advance for trying to put right any damage his “discussion” might cause.

 

 

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Replying to jcace:
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By Roland195
24th Apr 2013 16:09

Not an enquiry

Roger.Thornton wrote:

Exactly. This is a deliberate ploy by HMRC.

However, all taxpayers have a legal right to be represented and should simply say to HMRC that they have authorised their accountant to deal with HMRC on their behalf and that HMRC should therefore speak to the accountant.

The client should then terminate the call.

Train your clients, they NEVER, EVER, under ANY circumstances, discuss anything with HMRC.  We make it very clear that any client who does so is on his own, and we will charge in advance for trying to put right any damage his “discussion” might cause. 

I do understand your view but my problem is that HMRC dress these fishing expeditions up as scrutiny of the business records and state it is absolutely not an enquiry into any particular tax return. The fact is that the client has a statutory obligation to keep these records and therefore it should be reasonably inferred should be able to answer questions pertaining to them without the benefit of their accountant. Even if the accountant prepares the books on their behalf, the client should be able to answer questions regarding on what records he maintains to pass on.

I can't help feel that by trying to shield our clients from this, we are only making it appear that further scrutiny is required. I am not suggesting that we do not "prep" the client but perhaps just make it less obvious we have done so.

 

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By MJ Green Accountancy
24th Apr 2013 20:10

I've had two of these in the last couple of months, the latest one today. Both of them have been beauty therapists. It looks like they're targeting them.

 

I phoned HMRC in both instances, went through a few simple questions and assured them records are kept regularly up to date. In both instances HMRC have said that as a result of the conversation, they need take no further action.

 

You are far better off making the phone call yourself as your client may not understand the questions, although straight forward, and inadvertently trigger a further investigation.

 

I was on hold for 18 minutes as they're under staffed and the actual conversation lasted only 6 minutes.

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Replying to User deleted:
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By B Roberts
25th Apr 2013 09:03

Questions ?

MJ Green Accountancy wrote:

I phoned HMRC in both instances, went through a few simple questions and assured them records are kept regularly up to date.

Just out of interest, can I ask what questions were asked (were they the same questions for both clients?) ?

 

 

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Replying to andy.partridge:
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By MJ Green Accountancy
25th Apr 2013 09:21

They were similar

B Roberts wrote:

MJ Green Accountancy wrote:

I phoned HMRC in both instances, went through a few simple questions and assured them records are kept regularly up to date.

Just out of interest, can I ask what questions were asked (were they the same questions for both clients?) ?

 

 

They asked more questions the first time.

 

They ask the nature of the business and whether they're self employed.

They ask how often they record their takings and how they record them.

They ask how many transactions they make in respect of sales each month 1-10, 11-100 or more than 100.

They ask how many of the sales are cash.

They ask how many transactions they make in respect of purchases each month 1-10, 11-100 or more than 100

They ask how many of the purchases are cash.

 

There could be a couple more questions, but that's all I can remember off the top of my head.

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By jessie4697
09th Jul 2013 14:12

HMRC business record check

my self employed son in law runs a small business and has received a letter from hmrc saying they will be ringing him to ask a few questions about his business records. he has been in business 3 years and has always submitted his tax return on line in time. the first year he paid around £600 tax but the second year he did not earn enough to pay tax, that's probably why they are investigating. he does his books on the computer but his computer crashed a month ago and he had not backed anything up!!!! we have proof from the pc repair man that the comp crashed a month before this letter arrived. my worry is now how can they check his figures etc, will they go through all the purchase and sales invoices, do they take them away to do this, do they check every purchase invoice has a sales invoice against it? there are hundreds of invoices! thankfully they are all neatly filed away. my son in law is worried as to what questions they ask, what if he can't answer them, he's only young and this is very daunting to him. he has now decided (altho horse and stable door come to mind) that he is going to employ a tax advisor from now on to handle his books and the tax returns. he is going to see an advisor tomorrow.the letter states son in law can ring them before they ring him! would that be a good idea? also could the tax advisor ring on his behalf or could my son in law say to them that he has now employed a tax advisor. also is he best to be upfront to hmrc and tell them of the lost accounts, or should he re imput 2 years accounts?  phew what a nightmare, not sure whats to do for the best, any advice would be gratefully appreciated.

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By MJ Green Accountancy
09th Jul 2013 14:36

Your son-in-law can either ring HMRC himself or he can ask his new adviser to ring on his behalf. The adviser will need to be formally appointed before HMRC will talk to him though. this can be done by a paper form called a form 64-8 or online. The online method is quicker and therefore may be more appropriate given the circumstances.

 

HMRC will only ask a few questions about his record keeping, it is probably best for the adviser to speak to HMRC rather than your son-in-law. the fact that your son-in-law has appointed an accountant will be in his favour.

 

Based on the answers provided to HMRC, they may not actually want to see the records. It would be advisable for him to reconstruct his records, but tell him he needn't worry, this is not a full investigation.

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Replying to ireallyshouldknowthisbut:
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By jessie4697
09th Jul 2013 14:41

thanks so much for your quick reply. much appreciated, you have put our minds at rest!

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By jessie4697
11th Jul 2013 14:30

what am I best answering to these questions? I think I know enough :)1. On a scale of one to nine, where one is ‘not at all’ and nine means ‘completely’, to what extent do you understand your obligations to HMRC?
2. On a scale of one to nine, where one means ‘never’ and nine means ‘always’, to what extent do you need help understanding HMRC forms?

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Replying to HudsonCo:
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By MJ Green Accountancy
11th Jul 2013 14:40

You need to be honest but answers of seven or eight and two or three would probably be acceptable. Unless of course you are completely confident in your understanding of the tax system, but based on your query, I'm guessing you aren't.

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By jessie4697
11th Jul 2013 14:50

thanks, I am fairly confident, its just I panic at the thought of speaking to them!

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By jessie4697
11th Jul 2013 17:08

grr being ringing since 3.30 and constantly engaged

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By RG
11th Jul 2013 17:18

welcome to our world...

it can be a real pain trying to get through to HMRC, but you will in the end!

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By jessie4697
11th Jul 2013 17:56

I am going to speak with them on behalf of son in law as I do his accounts, will they speak to me without him being present, its a pain as we both work and he had to take 2 hours of this afternoon while we tried to get through?

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By MJ Green Accountancy
11th Jul 2013 19:48

You need to have a form 64-8 in place to be appointed as an agent to speak to hmrc on someone else's behalf if they're not present. If they are with you, they will usually, but not always talk to you.

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By jessie4697
11th Jul 2013 20:22

son in law has just phoned me to say he will ask his tax advisor/accountant that as we have not been able to get through will he ring them as he has  applied for the 64-8 form. I am not sure he if will be able to though, as we have only just appointed him. He has seen the way we do the accounts though.

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By karen1111
12th Jul 2013 11:00

I have received one of these as well!  My records are straight forward and up to date. Do they want to know exactly how many invoices each month as mine vary from month to month. Or will they accept an average, my average would be around 50 purchases and 40 sales, I mainly get paid by cheque as I prefer this its easier and cheaper to bank, but what cash I receive I pay my trade suppliers with as its cash on delivery, I don't have a trade account as I prefer to pay along as I go, any surplus is banked and all transactions are recorderd. I also do my accounts weekly and cash book I do each month when the bank statement comes.

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By MJ Green Accountancy
12th Jul 2013 16:08

Well Karen, it sounds like you keep proper records and therefore have nothing to worry about. You will only need to give them estimates of how many transactions you make, it will always vary from month to month.

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By karen1111
12th Jul 2013 22:13

clean bill of health :)  as

clean bill of health :)  as soon as they knew I had an accountant and did not take much cash they were satisfied! Great site this, it certainly helped me prepare, thanks

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By jessie4697
13th Jul 2013 22:26

Passed :)

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