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HMRC pilots business record checks

8th Apr 2011
Editor in Chief (interim) AccountingWEB
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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.”


Replies (6)

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By Tom 7000
11th Apr 2011 14:01

record checks

It always puzzled me why they wernt like HMC&E and came out every 3 years regardless, for a nose around. ok,ok HMRC, vat division, I'm so old fashioned sometimes

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By The Black Knight
11th Apr 2011 17:27


they are just realising that self assesment has been a disaster ! and can't admit that.


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By Eddystone
11th Apr 2011 20:11

Why a disaster ?

From our point of view SA is infinitely better than the old days of assessments, appeals, Commissioners' Meetings, loads of Revenue correspondence daily, etc., plus everyone's up to date.

Yes, some undoubtedly slip through the net and avoid scrutiny, but I'm sure that most accountants prepare accounts the same as always, with the thought that there could be a tax enquiry into any submitted. And the Revenue have surely been able to cut the staff to about 2 competent members nationally, the other 99,998 being employed by cheap-labour call centres on Mars.


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By Emma Neal
12th Apr 2011 14:05

BRC's and CCH Fee Protection
I questioned in January in an article I wrote whether “HMRC really intended for this to be a consultative document?” highlighting the point that the consultative period happened to be over both the Christmas and New Year breaks as well as through January - the busiest time of year for most accountants, so it comes as no surprise to us that HMRC already had plans to go live.

At CCH we have been advising our clients for the last couple of years that Schedule 36 and the powers available to HMRC are much wider than previous powers and as such there are benefits to having a truly adaptable policy covering different types of intervention. We are already covering these matters along with non-written interventions, Employer Compliance Visits and Business Assurance Visits.

Business Record Checks are just another type of intervention in a long run of different approaches taken by HMRC. We at CCH don’t believe that you should be caught out when HMRC start a pilot or changes the name of, or the way they carry out checks, interventions, enquiries, investigations and so on.

So clearly our Premier Protection Policy clients have already been advised that Business Records Checks will be covered. We also understand that not all Accountants carry out full bookkeeping duties and so we won’t just be expecting the Accountant to be present at the meeting with HMRC, we would also encourage them to meet with their client before HMRC do, so that they can check and advise their clients on recordkeeping requirements.

As our Premier Protection Policy allows up to 2 people to attend a meeting some of our clients are taking advantage of this by bringing in one of our consultants as the additional representative. As our Consultants are Ex-HMRC Inspectors/officers this adds a different dimension to the accountants offering to their client, which we believe benefits both client and Accountant.

We would also like Accountants to be aware that HMRC are able to carry out un-announced visits to clients simply by obtaining authorisation from a Authorised Officer within HMRC, we have seen instances of these visits too.

We would urge you to stress upon your clients how important it is for them to contact you if HMRC make any contact with them. Whether it’s a Business Record Check or any other check you should be able to advise your clients before HMRC do!

Emma Neal
Head of Tax and Vat Consultancy
CCH, a Wolters Kluwer UK Business
Direct +44 (0)1455 89 7216
Mobile +44 (0)7970 149833

Fax +44 (0)1455 897419
[email protected]

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By David C Moore
13th Apr 2011 20:51

Business records check

I submit my own tax return through my own agents reference and software. I have been targeted. My letter to me the client was received Monday 21st March and I responded with a telephone call at 10.11 am. Why the details, the letter is dated 21st March. The accountants copy came 3 days later. I had a call back to arrange the visit on one of the dates I had given. I hope they have some understanding of my business's when they arrive. As the comment was "Will your accountant be attending, we wish to know as he has not yet spoken to us. There was a deadly silence on the other end as I explained that they were talking to him at that very moment" Roll on next monday. My other business is teaching suba diving, may have to take them diving to fully understand that one?

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By The Black Knight
14th Apr 2011 10:09

tell them

you keep the cash records upstairs in your house and there is a house policy of nudity upstairs. lol

they could however be trying to lull you into a false sense of security !

They still have no idea where to waste their resources, unless the objective is a nice easy day out. probably is following civil service logic.

truly amazing how all this information gathering has still come to nought, I wonder what the risk assesment looked like on you ?

accountants ? must know the rules = less likely to make careless uninformed errors ?

Must be a high risk of fraudulent activity then ?

Interesting the 3 day delay before sending the Agent the letter ! I would question this, as why had your accountants not been informed at the same time. Steal the advantage from the off

funny the games they play

arrange the chairs so they sit on the highest one, then when you all sit down Pump yours up so that you are higher than them ! lol

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