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Business record checks: HMRC review

5th Nov 2012
Tax Consultant freelance
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Simon Sweetman explores HMRC's review of its Business Record Checks (BRC) programme, which resumed on 1 November

It would be fair to say that HMRC’s decision to resume its programme of business record checks has not been greeted with enthusiasm.

The CIOT seems particularly gloomy, with a press release that seems to anticipate all manner of problems of interpretation.

It also makes the serious point that HMRC still intend to charge penalties in year, where their power to do this is at least doubtful.

HMRC did at least pause and review the programme, and published its review in February. We should at least stop a moment to consider how unlikely this would have been a few years ago.

The review considers that there is clear evidence that the BRC programme has been effective in improving record keeping practices in smaller businesses.

However, it goes on to say that this cannot be fully evaluated until the businesses that have been visited are producing returns, and that means looking at their 2013 tax returns.

It goes on to quote statistics over 2437 visits. The first point is that 61% were categorised as “green” and only 11% as “red”.

The balance were shown as “amber”. There are then figures for follow up visits, though theer had only been 61 of these, of whom 80% are shown as having improved to “green” and only 3% had not improved at all, 3% here of course means a total of two.

It then says that 'the strength of feeling against BRC in the agent community cannot be overstated'.

It admitted that the way in which BRC was originally introduced had damaged relationships with the agent community, especially perhaps as it had morphed from a helpful exercise to one that would charge penalties for failure – and still at this point no real agreement on what constitutes adequate records.

The conclusion come to was that BRC should be more tightly targeted. How this suggestion squares with the need for early intervention, preferably before any return is submitted, is not clear.

It comes back in the end to looking at groups or sectors of taxpayers. We cannot tell who is non-compliant, but perhaps can tell who is likely to be because they practise a cash trade

The real difficulty, though, is not just that this looks like an approach where there will be tears before bedtime.

It is that it increasingly looks as though the real threat to the tax base is to be found in pure evasion and in the complex avoidance strategies of big business and the wealthy.

The small business person who is attempting to be compliant, which may be 90% of those visited here, is not the major risk. It seems a bad time to be launching a major assault on them. 

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By johnjenkins
06th Nov 2012 10:19

That is where

the money is though. HMRC can't get it out of the big boys and the poor haven't got any so it's us in the middle that will be hit.

I think the bigger question is why? The answer is they need more money to make the economy look better for the next election.

The ARSE[***] (adequate recording system experience)(I'm sure others can come up with better abbreviations) will not work because it has not been legally defined. So we end up with an almighty issue as the employment status. I wonder what the EU would call adequate records? Still it's good to know MP's are now keeping adequate records to claim their expenses.

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Jennifer Adams
By Jennifer Adams
06th Nov 2012 11:37

Lots of comments...

Below is the link to another article on this subject that currently has 17 comments...

https://www.accountingweb.co.uk/article/hmrc-re-launches-business-records-checks/533378 

 

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By Halex
12th Nov 2012 09:42

ARSE[***] - Thanks for the useful acronym

A good opener for tradesmen?

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By Oppco
26th Nov 2012 10:30

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

 

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