HMRC pilots business record checks
Accountants have reported that their clients had started receiving letters in the past week advising them that business record checks would be taking place under HMRC’s new scheme.
The news came as something of an unwelcome surprise as the consultation period only finished on 23 March. According to the consultation document, the full record checks are due to being in July.
According to HMRC sources, however, the letters that have been sent out are part of a “test and learn” pilots taking place in four offices. “No penalties will be charged as a result of these visits unless something is seriously, seriously wrong,” said a spokeswoman.
AccountingWEB member yorky1000 first raised the alarm after receiving an email alert from Abbey Tax Protection that business record checks had started going out.
From letters submitted by clients, Abbey Tax consultancy and advice team manager David Marples worked out that four offices were sending out the notices. From discussions with HMRC staff members, he discovered that around 30 officers are working on the pilot and that they will be visiting around 3-4 companies a week. This means that up to 1,800 “test and learn” visits may take place before the record checks begin in earnest in July.
Businesses in Sheffield, Liverpool, Newcastle and Scotland appeared to be getting the letters, added Marples. “No specific sectors are being targeted, but they are being risk assessed on things like late and outstanding returns, and where return include round sum amounts - those type of things.”
For clients of Abbey Tax and other insurers, the checks pose a new challenge: will they be covered by existing fee protection policies. According to Marples, the business record checks are being carried out under schedule 36 of the Finance Act 2008. “You can have cover for that. The practice will decide which cover they like - full enquiries, aspect enquiries or schedule 36 - and pay for what they get.”
Abbey Tax’s David Maples commented that the timing of the first letters “seems like lipservice”. AccountingWEB members were even more critical in the Any Answers thread, referring to the concept of “insultation - where a government department conducts a consultation exercise with no intention of listening to the responses”.
Paragraph 4.40 of HMRC’s Business Record Checks consultation document (85kb PDF) raised the possibility of trial period to iron out any “wrinkles” before full checks begin, and asked whether it would be useful to do so. However the dispatch of letters on what appears to be the first working day after the extended consultation date closed suggests that the department had already made up its mind, but had failed to inform anyone.
“This is being done totally outside the consultation,” said Marples. “[HMRC is] ignoring what came out of that and is dipping its toe in the water to see how it’s going to work from their perspective. Then they’ll decide whether they need to change anything. Why didn’t they communicate that they will do some initial pilot testing before full commencement in July?”
Even though HMRC is trying to reassure businesses that the checks are about keeping better records, the speed with which the pilot launched adds to the perception that “it’s all about the money”, he said.
Both the ICAEW tax faculty and the CIOT followed up these reports and met with HMRC officials on Thursday, at which the department agreed to amend their its notification letter to clarify the basis of the trial.
CIOT deputy president Anthony Thomas commented: “HMRC’s reassurance that this is a ‘test and learn’ pilot where no penalties will be levelled, other than in exceptional circumstances, is welcome. However they should have made this clear to tax advisers, business organisations and, above all, those taxpayers – represented and unrepresented – they are targeting, from the outset.”
You might also be interested in
AccountingWEB’s interim Editor in Chief has been with the site since 1999 and returned to the editorial hot seat in March 2020 to lead the hunt for a long-term successor... Send a DM if you're interested! When not tending to the needs of AccountingWEB members and geeking out on their technology habits, he devotes much of his time to his oddball...