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Business Record Checks put on ice

6th Feb 2012
Editor in Chief (interim) AccountingWEB
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AIA

HMRC’s programme of Business Record Checks is going back to the drawing board.

The decision follows a review prompted by feedback from professional and business bodies who argued that the tax department’s “helping hand” approach to paperwork was more of a hindrance.

After reviewing the record check pilot programme and listening to these views, HMRC director of local compliance Richard Summersgill acknowledged “the need for a fresh approach”.

The results of the review published on Friday 3 Febraury, showed that of 2,437 business records checks carried out up to 4 January 2012, 28% of businesses received an "amber" rating showing the existence of some issue with their record keeping, and another 11% were rated as "red", bad enough to require a follow-up visit.

The scheme has had a fraught gestation period, with advisers concerned about the visits turning into fishing trips for tax investigations and the stance of their professional indemnity insurers. To make matters worse, HMRC then embarked on a pilot programme last April without informing professional representatives.

While publicly Summersgill and senior HMRC figures continue to talk up the merits of helping businesses improve their record-keeping, the scheme was trimmed back from a planned 50,000 to 20,000n visits a year when the full roll-out began in September 2011.

Even with the amended programme, HMRC estimated the programme would generate benefits worth £124m from improved record keeping (and tax receipts) through the period covered by the government’s current spending review. The speed at which HMRC appeared to be implementing the programme was one source of discomfort for advisers, but following the latest review, all new appointments will be put on hold until a new process is devised and put in place after the turn of the financial year in April.

“The strength of feeling against BRC in the agent community cannot be over-stated,” the review document noted, adding that many who wanted to improve the relationship between HMRC and the tax profession felt “the way in which BRC were introduced has damaged that relationship”.

The main point of contention for the advisers is that inspectors turning up from HMRC to check clients’ inadequate record-keeping, they will question the competence of their accountant.

The internal review recommended turning the checks into more tightly targeted interventions, set within an educational framework HMRC should work with representative bodies to define what constitutes “adequate” and the point at which companies should be subjected to a follow-up visit to ensure improvements are made.

But the sting in the tail is likely to remain. Further recommendations in the latest paper call for a potential “tax intervention” if companies with inadequate records fail to improve. “In extreme circumstances a penalty might be applicable,” the internal document said. “If a business is referred for a full audit and it is found that tax returns submitted before, or after, the referral were inaccurate and that inaccuracy was a result of inadequate record keeping then a record-keeping penalty should be charged in addition to any other penalty due.”

The review noted legal arguments from professional bodies that HMRC has no legal basis to raise penalties in-year for inadequate record-keeping. Penalties are only appropriate if it can be shown that the inadequate record-keeping contributed to mistakes on the actual return. HMRC’s solicitors argue otherwise.

Nevertheless HMRC accepted that if it did pursue the checks as currently designed and start to charge penalties, it would cause reputational damage to HMRC. “Customers, and agents, still believe that BRC is a fishing exercise designed to ‘catch them out’ and that, unlike many direct tax interventions, it is not seen as sufficiently targeted to be anything else,” the report noted.

CIOT president Anthony Thomas, who has been outspoken about the issue during the past year, welcomed the recommendations as “promising” and praised HMRC for taking a fresh look at the BRC programme.

“Tax advisers are strongly supportive of efforts to improve record keeping by business, but up until now HMRC have been going about it the wrong way, endeavouring to eradicate error by increasing burdens disproportionately,” he said. “A good programme to improve business record keeping will involve HMRC and tax advisers working together to educate business about good practice and support them in improving their systems, as well as warning about the risks of poor record-keeping.”

Replies (48)

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By johnjenkins
07th Feb 2012 09:59

You will never get perfection

with Accountancy records. It's very simple. Builder, butcher, WHY, normally are good at their jobs and deem paperwork a tiresome if not loathsome chore. They do not have enough resources to employ bookkeepers or accountants to do the paperwork. They will keep records that they understand and are simple to do. Of course this is not good enough for HMRC. They don't even like Directors loans being balancing figures. Unfortunately they live in a world that doesn't exist anymore, but I am glad that they are going back to the drwaing board, and hopefully they might have learned something.

I suppose Real Time could be extended so that small entities just plonk in their figures once a week and HMRC will work out the rest. What will we do then - challenge HMRC figures, charge them interest and penalties for not getting it right?

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By Trevor Scott
07th Feb 2012 10:48

The type of Officer ...

... on these visits is from a world that only ever existed in their text-book examples.

The new HMRC policy (not practice) will be that they send out a letter first, "try" to arrange an exact appointment in most cases ...but the reality will be  .... some will involve a notification that they "will drop around sometime", or the Officer will make a mistake and turn up early or on the wrong date, then the "what's the problem, have you got something to hide" lark will start. 

No doubt some Officers will just drop around unannounced, claiming they had tried to phone and arrange an appointment but couldn't get an answer, so they decided to drop by an arrange an appointment; and will then try to claim, since I'm here, can I look at the records and then perhaps I don't need to make/record an Official visit. Does this sound familiar?

 

And I don't think the Revenue will ever understand that if they treat taxpayers badly or unfairly, even treat them as though they are guilty of something, then they will increase the likelihood of the taxpayer then fiddling his taxes. 

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Replying to Tornado:
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By frustratedwithhmrc
07th Feb 2012 13:55

Only HMRC would commence a lose-lose strategy...

Trevor Scott wrote:

And I don't think the Revenue will ever understand that if they treat taxpayers badly or unfairly, even treat them as though they are guilty of something, then they will increase the likelihood of the taxpayer then fiddling his taxes. 

...or for many think, this simply isn't worth the hassle and shut up shop.

Alternately, some (such as those working in primarily cash based roles) will simply think, sod this for a bunch of soldiers, nominally 'shut up business' and then simply go into the black economy.

The problem with taxation is the higher rates go (including Uniform Business Rates) and the more that HMRC ramps up the harrassment factor in dealing with taxpayers, the more will leave the legitimate economy and move into the black economy.

HMRC is playing a lose-lose strategy and must bring this idiocy to a close as they are turning those who would assist them (agents, institutes, etc.) against them.

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By johnjenkins
07th Feb 2012 15:33

I think they (HMRC)

have already gone past the point of no return. The only thing that will save them is "agent view" and they are bound to mess that up.

I've been an Accountant for 47 years and we all used to moan about HMRC but I've (and many of my colleagues) never felt such a deep loathing for them. Surely they must realise what they are doing. Whether it's a strategy in the hope that they will come out on top I'm not sure.

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Replying to Tornado:
By Nick Graves
08th Feb 2012 13:18

The only positive spin

on this report is that HMRC appears to have noticed finally!

The zombies in charge (or on charge) seem to have been hell-bent on antagonising and alienating agents for so long now, your [this was supposed to quote Johnjenkins but clearly the SW was designed by HMRC's engineers!]  deep loathing is no doubt justified.

I had come to the conclusion that they must be History Man-type anarchists, trying to instigate a total collapse of the system from within, once agents & taxpayers began simply to ignore HMRC altogether & stopped paying all taxes. Which in light of the Dodgy Dave fiasco, seems fairly close now.

Maybe this is the first sign that not all of those in charge are that sociopathic/corrupt/plain stupid and that some degree of sanity may prevail.

It'd be much less ugly if sanity were to return.

 

 

 

 

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By Mehmet
08th Feb 2012 10:33

Waste of time

Simply a big waste of time.

 

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By alisonatintuit
08th Feb 2012 10:53

what role should software vendors play in this?

Hi everyone,

I have been watching this and am intrigued by the concept of the road to hell being paved with good intentions.  It seems that everyone agrees that better record-keeping is good for everyone concerned, especially the business owner who can not only make sure they are capturing all revenues and expenses, but are also able to see the trends in their businesses and make better business decision overall.  And it makes the accountant's job easier too because they can then do the tax returns and compliance work, but also add valuable advice and consulting services as well. So the issues seem to be in the way these compliance checks were rolled out rather than the concept of helping businesses keep better records and then having a check-and-balance system in place. 

With this in mind, my question to you is - how do you think a software vendor can help?   And what role should we play in these discussions (if any?).  Intuit works long and hard to create software (ie: QuickBooks) that helps businesses keep records easily, and facilitates easy interactions with their accountants via that software... but is there more we could be doing?  If so - what?

Alison Ball
Head of Accountant Programmes, Intuit Ltd.

 

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By Old Greying Accountant
08th Feb 2012 11:26

Having HMRC do record checks ...

... is like getting a cat burglar to advise on home security.

Either way you'll end up being robbed blind.

If and it is a big IF, business records checks are necessary then they should be done by a neutral agency.

John has hit the nail on the head, small traders have thier profession because it is what they are good at, they do their best with the admin side. If they make mistakes the effect is probably minimal in terms of tax loss (and costs more than teh tax lost to recover it) but it not fair to fine them for not doing something they are incapable of doing (either through personal skills or expense of third party ones) - especially when they are largely the product of our woefully inadequate education system! As alchemists have been proving for years, you can't turn lead in to gold!

Far better to concentrate on those who wilfully avoid tax than persecute those who do their best to pay the correct amount and whose underpayments are through honest mistake. And by this I mean the multi-nationals that manipulate tax rates and blackmail governments  as much as I do the cowboy builders and cash in hand merchants.

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By Ian McTernan CTA
08th Feb 2012 10:59

Hooray

First bit of sense I have seen from the Revenue, realising after being told several thousand times that it was completely the wrong approach to reach the conclusion that it was the wrong approach...

The people who come up with these ideas in the first place seem to have no experience of the real world at all- it's almost as if they go out of their way to design a system that place more and more burdens on businesses..it's small wonder that with no cap on benefit payments many people give up and decide to live better with less stress on £30,000 of benefits.

 

One day they might wake up and realise that designing policies that encourage businesses to get on with what they are good at, ie doing business (and cut down on endless regulations), will generate way more tax than any other hair brained scheme they dream up.

Want better record keeping? Simple.  PAY an accountant, book keeper or CTA to visit new or selected businesses and make recommendations.  So instead of funding civil servants to do this job (with many of them with no formal qualifications or practical experience), sign up a few thousand professionals with the right experience and get them on the job.

Got to be a better use of resources then the current 'we're here to check your record keeping but really we want to fish and are under pressure to produce tax yield from this'.

Time to start rebuilding the broken relationship with advisers!

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Teignmouth
By Paul Scholes
08th Feb 2012 11:07

OK already

I agree this was a badly planned & implemented policy and if they'd bother to ask even their own staff, let alone others at the sharp end, they would have realised it was not going to work.

However this does not mean that there are not issues over poor, if not wholly inadequate record keeping, that HMRC should be interested in unearthing and rectifying, wouldn't you see that as part of your role if you were tasked with collecting the right amount of tax?

And this is where we should be playing a part.  To my mind it is unacceptable that anyone wanting to run their own business should not see proper accounting and management as part of their role and that if they see paperwork or anything else to do with the books as "tiresome & loathsome" they either need to be educated or, if it means they neglet it, should not be in business.

It is clear from many postings on this site that many accountants still see their role as repairers, accepting clients' "incomplete records" as the norm, with patching up & completion year after year as their bread & butter fee income.  Whilst this policy from our side of the fence persists then we reap what we sow.  If on the other hand we fix for good and educate clients in how books should be kept and support them in it then this sort of discussion should become reduntant.

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Replying to Smokoe Joe:
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By The Black Knight
09th Feb 2012 10:51

hear hear

Paul Scholes wrote:

However this does not mean that there are not issues over poor, if not wholly inadequate record keeping, that HMRC should be interested in unearthing and rectifying, wouldn't you see that as part of your role if you were tasked with collecting the right amount of tax?

And this is where we should be playing a part.  To my mind it is unacceptable that anyone wanting to run their own business should not see proper accounting and management as part of their role and that if they see paperwork or anything else to do with the books as "tiresome & loathsome" they either need to be educated or, if it means they neglet it, should not be in business.

It is clear from many postings on this site that many accountants still see their role as repairers, accepting clients' "incomplete records" as the norm, with patching up & completion year after year as their bread & butter fee income.  Whilst this policy from our side of the fence persists then we reap what we sow.  If on the other hand we fix for good and educate clients in how books should be kept and support them in it then this sort of discussion should become reduntant.

I agree, but very often our files are the completion of adequate records, for some the book-keeping is done for the year at the same time as the accounts preparation. And some I admit everything is missing (a fixed fee nightmare)

We used to have a poster on the wall in one office I worked in (20 years ago) that said "to Er is human, but to really cock[***] things up takes a computer" and I have seen many a complete muddle created on software programs because the client or book keeper had not the ability or the training to understand.

Unfortunately book-keeping is seen a as a menial task often performed by the lowest paid, or the person that did not step back when the any volunteers call went out.......we all know it is more skilled than that.....although I have known accountants and inspectors that did not understand double entry book-keeping...but still believed it a simple task to perform and understand.

Surely the answer is education and to impress upon small business that it is important to have a good accountant and good business records If only to get their tax right ( cuts both ways! )...those having problems perhaps should be advised that they need their accountants help (after all we are the experts at this) not send in newly trained amateurs that pretend to be experts and dish out fines...that then waste (wasted accountancy fees in my opinion) resources fighting off the penalties so that the business can continue.

We have seen fines recently where the last straw folded the business, cheaper to shut down than argue..Hmrc etc never got the money either, so everyone lost.

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By karen.morriscook
08th Feb 2012 11:20

record review

One of my clients has a visit due at the end of this month.  We operate the payroll and the visiting inspector has told us that we have to print out all information and send them copies of our correspondence with them.  It is a reasonable sized payroll and we have told her she can't have our file because we will need it and the client's premises are some 50 miles away from our payroll bureau.  We asked her who she expected to pay for our time to photocopy and/or print out the entire contents of a years file and she really didn't seem to care.  In the end we told her that if she wanted to review the paye files she would have to come over to our office but she is not prepared to travel that far so we have stale mate.

It seems to me that she is now questioning our ability to calculate paye correctly not a good way of getting an accountant on side.

 

The premises that she has chosen to visit has a dedicated book keeper and keeps records on Sage. 

There are always small errors in anyone's book keeping that is why they employ an accountant to check over them and produce accounts at the end of the year - therefore it seems to be to be a complete waste of time to review book keeping for a year on which the accounts have not yet been produced and if this client gets anything other than a green light for their book keeping systems I will be complaining in the strongest terms.

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By MartinLevin
08th Feb 2012 11:31

Are clients TRADERS or BOOK-KEEPERS?

There is always a fundamental flaw when Government Departments are involved.  As an "oldster" I recall a former Speaker of the House of Commons (Sir Bernard Wetherall, in fact), speaking (in the 1970s?) about the fact that around 95% of all businesses employs five or fewer employees - yet Her Majesty’s Government treats them all as being as big as ICI.  Consequently how can passing a law ever help "small business".   [Please do NOT call them by initial letters as that is a meaningless and slovenly way of speech].   Therefore, faced with this at the back end of the 1970s, I rolled up my sleeves, and designed the ABC Accounts Book.  I chose to issue one free to each client - who were delighted to realise that record-keeping was indeed simple - merely copying (from bank cheque book stubs, paying-in books, cash vouchers, etc).  The amount of time that it saved in my Practice was phenomenal.  Any allegations from the TaxMan of “unreliable records” were quickly defeated.  So, after almost 40 years, has anything changed?

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Replying to DJKL:
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By frustratedwithhmrc
08th Feb 2012 16:11

Disproportionate cost to micro businesses

MartinLevin wrote:

There is always a fundamental flaw when Government Departments are involved.  As an "oldster" I recall a former Speaker of the House of Commons (Sir Bernard Wetherall, in fact), speaking (in the 1970s?) about the fact that around 95% of all businesses employs five or fewer employees - yet Her Majesty’s Government treats them all as being as big as ICI.

Exactly. HMRC always come up with approaches that work for organizations from a small office upwards, but then target from the small office downwards. The big boys don't get off scott free, but have the necessary staff and in-house bookkeeping / accounting expertise carried as an overhead to deal with HMRC invading their offices for a couple of days.

In the vast majority of cases micro businesses (<5 employees, but usually one man band or husband and wife) have neither the time, nor the aptitude for dealing with HMRC and therefore have to get an accountant involved to deal with these issues.

This involves:

Time away from their businesses dealing with HMRC (potentially reducing turnover, profitability and tax)Time and cost of involving their accountant outside normal schedule (year end, quarterly VAT, etc.)BRC potentially triggers Tax Investigation Insurance with the risk of increased premiums

In short BRC's are a disproportionate cost to micro businesses, are questionable from an enforcement perspective (penalties for in-year errors) and totally unnecessary where a qualified accountant is preparing the accounts anyway.

There might be some basis for these as a training support for new businesses, but it is unnecessary (and probably inappropriate) for this to be HMRC led.

HMRC should get back to chasing tax evaders (at every level) rather than drown micro-businesses in red tape and beauracracy and then harrass and annoy them.

There might be a justification if BRC's were uncovering widespread evasion, but HMRC's own statement on how they are managing HM Treasury expectations downwards shows this is not the case.

So BRC's are a solution to what problem exactly?

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By johnjenkins
08th Feb 2012 11:36

So Paul

your message seems to be "big is beautiful", because they are the only business with time and affordability (mainly because they are doing nice deals with HMRC) to be able to produce any sort of records that HMRC would deem acceptable. When will people realise this is not a perfect world. Have you ever followed a true inventor? They haven't got a clue about paperwork but they create business, jobs etc. Can you imagine when the wheel was invented. Ooh sorry mate but your paperwork ain't right so we can't accept this wheel thing. No, more likely, HMRC would confiscate it for penalties for not keeping "proper" records.

Since the GB days small business have been hit with a sledge hammer by HMRC yet we can't deport a national security risk (bit of Ben Elton there - whatever happened to him). Governments need to get their act together big time or they will face the wrath of "joe public". 

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By Romanista
08th Feb 2012 11:54

Paranoia in the accountancy profession?

I have facilitated two business record checks at our offices.  Both involved small clients who had manual records and whose proprietors wrote them up themselves.  One, a small restaurant, didn't even have a till never mind 'z' total prints.

 

Both reviews were conducted quickly, efficiently and sesitively and in the case I mentioned the officer accepted that a till was not necessary in the particular circumstances.  Both passed with no comment.

This is one of the few areas of service provision by HMRC with which I am actually satisfied.  The majority of the remainder of its service delivery is terrible.   Not sure why we are so suspicious.  We always complained in the past that HMRC would open enquiries without knowing even the most basic facts about a particular business and how it operated.  Now that it is trying to gather information to enable it to target more effectively we see a threat?

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By johnjenkins
08th Feb 2012 12:09

Not sure why we are soooooo suspicious?

Because most of us have seen it, bin there, got the tea shirt etc.

Perhaps your checks are one of the reasons HMRC are going back to the training board - not getting the results they want. Now that is being paranoid.

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Replying to The Special One:
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By Romanista
08th Feb 2012 13:23

If even ten percent of the stories I get told about in my 'local', by taxpayers who tell me about advice they have received from their accountants, are correct then HMRC have every right to be suspicious.

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By Mike Carter
08th Feb 2012 13:23

A bit pointless

It looks like HMRC had a collision with reality.

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By justsotax
08th Feb 2012 14:37

Romanista - interested to hear these

'stories'....you imply that the accountants in your local area are giving advice that is fraudulant? 

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By Michaeljwc
08th Feb 2012 14:38

Business Records Checks

Quite right, they were a total waste of time. I attended one and the two HMRC officers didn't seem to have any grasp at all of how good accurate business records should be kept. It was a completely meaningless exercise which cost my client unneccesary fees.

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By P2
08th Feb 2012 15:24

Writing up the books

I have just read this thread from the beginning up to this point.  To builders and butchers I would like to add joiners, of whom I have two as clients.  Both are excellent at their work and their businesses are doing well, but they work long hours and have small children with whom they want to spend some time at weekend - NOT doing book-keeping!

They pay me £60 a month to write up their books.  They are very diligent at putting all business expenses through their business bank account and using the business debit card, even for small expenses such as M6 tolls, etc. and with the new "scan-swipe" credit cards the few extra small transactions (currently paid for cash) will soon be evidenced on credit card statements.

Each month I receive from them the bank and credit card statements and all supporting documents - rarely is there a transaction that does not have a supporting document, VAT receipt, etc.

I also borrow their work diaries for 24hours and write up the mileage log and benchmark meals from the diaries which show where they've been working, how many miles they've travelled in the van and how many hours away from home (including late working) to qualify the £15 benchmark meal rate and then give them the diaries back a.s.a.p.

I check that all work in the diaries has been invoiced.

The work diaries are really all that is needed for these two to "manage" their business affairs successfully.  I write up everything from the compliance point of view.  The relationship works well.

If HMRC were to conduct a BRC at their homes the visiting officer would simply see the current months envelope of receipts (all muddled up) and it may not occur to them to even ask to see the work diaries.  This would most likely flag up a "RED" rating.

My first point is that if HMRC were to conduct a BRB at my offices a month later the visiting officer would see everything filed in order, reconciled and set out accurately and completely, with payroll records up to date, VAT returns in order, mileage diaries in place and benchmark meals agreed and authorised.  This would flag up a "GREEN" rating.

My second point picks up on earlier posts (see above) that what records accountants and HMRC need in order to report tax affairs accurately and completely is not necessarily what the joiners would find most helpful in managing their business on a weekly basis.  For them their business is as much looking forward to gaining new contracts as recognising the need to record accurately what work has been done in the past, what has been earned and what it has cost.

That is why God made some of us craftsmen and some of us book-keepers and accountants.

 

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By johnjenkins
08th Feb 2012 16:16

What about the

self-employed (because they can't get a job) that can't afford £720 a year. Yes it could well cost them more if HMRC dug their heels in. If you ain't got it you can't pay it. The small business is suffering big time and to get £26K on benefits would, to some, be heaven.

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By johnjenkins
08th Feb 2012 16:28

@frustratedwithhmrc

The HR case is classic. £8m, where will they get that back from - small business cos they are easy targets. HMRC will never go after the "big boys" with the same gutso as SME's. It's all done over lunch.

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Teignmouth
By Paul Scholes
08th Feb 2012 17:35

Keeping adequate records

Given the feeding frenzy on this thread I'm probably wasting my breath (again) but just to follow up on previous comment and johnjenkins's response:

If you can, just for 1 minute, stand back, wipe the blood from your lips and look at this objectively, is it not in everyone's interests for businesses to keep adequate records and to make sure they are kept up to date?

I'm not saying perfect and I'm certainly not talking big company stuff, just ordinary records as have been suggested by us & HMRC for years.  Yes many will not have the capability or wish to do it themselves (I don't) but that doesn't mean they should dismiss it as an irrelevance because their accountant will fix the mess at the year end.

Like it or not, we live in a world with rules and laws with which we have to comply  (if it wasn't for compliance most of us would be out of business).  I get my regulatory visit every so often, clients get me to check over their books throughout the year and, from time to time we should all expect to get a checkup from HMRC, whether it be for VAT, PAYE or just record keeping.

I can understand frustration with poorly planned and executed policies from HMRC over this but clearly we have all had different experiences on the ground with them and the rabid anti-anything HMRC stuff above doesn't help and gives the impression that they have no right to stick their noses in where they are not needed or wanted.

They do & can and you can either help or hinder, with the latter policy causing us all more grief.

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Replying to jaffe123:
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By Mike Carter
08th Feb 2012 19:35

Adequate records yes. Who defines that. There are no legal definitions of what that means. If a business can track income and expenditure in a way that allows for taxes to be paid on time and accurately then by definition they are adequate. The records only need to be in that state on the day the tax is paid.

A jobbing builder Daniel Jackson may choose to keep all his records in Cuniformon on clay tablets during the week and then summarise the results on Sage once a month. His records would be adequate but may fail a random unannounced inspection since HMRC may not be familiar with Cuniform.

A large company BigComay use SAP for everything. There records may not be adequate if it takes them a month to do data entry.

Anyone can read Bookkeeping 101 - HMRC Edition - it doesn't escape the fact that 'adequate' is defined by outcomes not forms. No two large businesses do things the same way let alone small ones.

Sometimes I really think that "run a small business for a year" should be a training scenario that HMRC should do. "You've worked 50 hours this week, it's 5pm on a Saturday and now you have to do paperwork for 3 hours prior to filing a paper VAT return because the online system still cannot authenticate you properly. Party on Wayne"

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Replying to jaffe123:
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By frustratedwithhmrc
09th Feb 2012 09:50

BRC's must focus on those businesses most likely to be failing

Paul Scholes wrote:

Like it or not, we live in a world with rules and laws with which we have to comply  (if it wasn't for compliance most of us would be out of business).  I get my regulatory visit every so often, clients get me to check over their books throughout the year and, from time to time we should all expect to get a checkup from HMRC, whether it be for VAT, PAYE or just record keeping.

I can understand frustration with poorly planned and executed policies from HMRC over this but clearly we have all had different experiences on the ground with them and the rabid anti-anything HMRC stuff above doesn't help and gives the impression that they have no right to stick their noses in where they are not needed or wanted.

Okay, since HMRC likes 'profiling' take a profiled approach. What are the factors which determine if a business is 'likely' to be sub-standard in record keeping:

Businesses which have been subjected to HMRC investigations / BRC's previously where poor record keeping was a factor.Businesses started within the last 18-monthsBusinesses without an agent who has professional accreditation from one of the main accountancy bodies

Contrarywise, the following should result in a lowered profile

Businesses with an agent who has professional accreditation from one of the main accountancy bodiesSatisfactory completion of a BRC should result in a lower profile for a specified period (say 5-years)

Businesses employing or operated by a qualified bookkeeper

Completion of a HMRC recognized training session on 'Keeping Adequate Records' to be run by Business Link or similar (NOT HMRC)

There should be no penalties for inadequate bookkeeping as this should be seen as a training and education issue only, the only failures for which penalties should apply are those for submission of inaccurate, substandard or misleading accounts.

The only sanction from a BRC should be a letter detailing where the bookkeeping is inadequate, how this can be improved and the consequences for accounts submissions.

This must be about educating those who NEED education and not an opertunity to gather additional penalties and tax. Ideally, BRC's should be carried out by a truly independant body rather than HMRC itself.

The reason that members of AccountingWeb have taken such exception to BRC's is:

Because of the high-handed manner in which HMRC have approached this whole issueHMRC largely ignored the guidance provided by the professional bodies regarding BRC'sHMRC treated the consultation process with barely concealed contempt when they launched BRC's before the consultation was even complete

 

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Replying to jaffe123:
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By Dusty
13th Feb 2012 22:07

I wish I'd said that

I just realised that what I was trying to say has already been said very succinctly by Paul Scholes. This is it (in a nutshell)

Paul Scholes wrote:

I can understand frustration with poorly planned and executed policies from HMRC over this but clearly we have all had different experiences on the ground with them and the rabid anti-anything HMRC stuff above doesn't help and gives the impression that they have no right to stick their noses in where they are not needed or wanted.

They do & can and you can either help or hinder, with the latter policy causing us all more grief.

 

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Teignmouth
By Paul Scholes
08th Feb 2012 20:28

Who defines adequate records?

Mike, might I suggest 600-700 years of practice with maybe some fine tuning from an accountant?  Or, for the DIY person, Businesslink. No MBA or maths degree needed. 

Just realised you might be joking or maybe I'm not on AccountingWeb?  Anyway, when I see the "poor hard done by small business" & "the tax office don't understand me" stuff, time for me to exit.

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By Dusty
08th Feb 2012 23:13

A load of hot air

Maybe I missed it and there was someone who'd actually recieved a visit in the comments above. Romanista 'facilitated' two checks and was pretty positive about them.

I've had a visit. I keep fastidious records because I'm in a business where I have to. I made no preparation. He arrived on time. It lasted 15 minutes.

 To my mind it's a step in the right direction. Many businesses do need advice on keeping records and ultimately the right advice will save them hours.

It also teaches the HMRC to understand their customers better. They will undoubtedly come across methods that they can suggest to other clients.

As accountants you must understand the frustration of trying to unravel entries that don't add up or make sense. Most of these are not a result of tax evasion and yet must present an enormous amount of extra work for HMRC especially when the tax payer doesn't understand what he's being accused of..

My only reservation about the whole affair was that visitees were supposed to be random. The inspector assured my of this on arrival yet, on departure, he commented that he wondered why I had been selected for a visit.  

 

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By johnjenkins
09th Feb 2012 10:21

@ Dusty

Why do you think HMRC have gone back to the training board? Because they are not getting the results they want. All this huff and puff they have tried to inflict on us about inadequate records. When they send their people out they find most tax payers do keep adequate records. So re-training. Watch the next batch of visits. It won't be a 15minute coffee break.

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By Nick Graves
09th Feb 2012 13:55

BRCs are probably more fraught for HMRC officers

IME.

Yes, I have seen how two of them (one VAT, one IR) come down to fight over one set of basic invoice summary spreadsheets kept by one of my clients.

He got a clean bill of health with very basic, but accurate records.

He was so helpful, he almost revealed too much information, which nearly caused an unpleasant scene between me & the poor inspector who'd not actually intended to fish. Being sent round someone's gaff under such circumstances is not exactly stress-free for their employees.  

So yes, fraught with dangers, ill-conceived, not cost-effective. This is what we said at the time. But who took any notice...

On top of the constant odds-shouting by HMRC, who have never done anything wrong in their entire history ever (and even evidence to the contrary is dismissed like you're something they trod in) it was just another step too far.

 

 

 

 

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Replying to paulgtfc:
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By Dusty
09th Feb 2012 17:06

Foot shooting?

Nick Graves wrote:

He was so helpful, he almost revealed too much information,

 Try as I might I can not think of a legitimate basis for that statement. Can anyone help me out here?

 

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Replying to Micro Services:
By Nick Graves
10th Feb 2012 15:08

I'd have thought so.

Dusty wrote:

Nick Graves wrote:

He was so helpful, he almost revealed too much information,

 Try as I might I can not think of a legitimate basis for that statement. Can anyone help me out here?

 

 

Can you not?

When dealing with enquires, not you not attempt to limit the information provided to business account and not to joint/personal accounts, unless absolutely necessary?

It's widening the scope, not that there's something to reveal, that is the issue.

 

 

 

 

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By justsotax
09th Feb 2012 13:57

Perhaps what has actually happened is that

the Revenue have found that in many cases where the taxpayer hasn't got an accountant or prepares their own books, they actually find more expenses than income that has been 'missed'....how often do we all find ourselves saying to the new start up business, you can also claim...this that and the other.

 

Another project no doubt costing millions to put in place with minimal benefits.

 

 

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By The Black Knight
09th Feb 2012 17:13

offshore bank account

in the name of Fredo the 28th of the jum ping dynasty.

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By Trevor Scott
10th Feb 2012 11:21

SInce HMRC have customers...

... and often claim to be business-like, I say let ICAEW do a Business Records Check on HMRC. Just imagine the fine!

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By Dusty
10th Feb 2012 21:46

@Nick Graves

Personally, I'd say his over-enthusiastic revelations imply that he has nothing to hide. An accountant jumping in and telling him to shut up implies the reverse and will no doubt earn him a visit from an 'inspector' in the not too distant future.

Although the visits were solely to ensure businesses were keeping adequate records, it would be naive to assume that the guy doing the visit isn't going to flag up a potential tax evasion if he spots it.

 If two of us thought 'Fredo the 28th' what's a tax inspector going to think?

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By Nick Graves
11th Feb 2012 14:16

Well precisely.

The whole thing is clearly a 'fishing expedition' and thus any chance of widening the scope must be avoided. The officer may infer what he likes.

Jumping in shows we aren't going to play that game - any transaction is guilty until proven innocent in HMRC's eyes, as we well know.

I have already written that in this particular case, the records are good - do you like the idea of a disorganised client (maybe without agent present) innocently widening the scope? Even for the totally straight, it can unnecessarily incur additional accounting costs in repudiating nothing. That's what most investigations rely upon. 

It puts both HMRC staff & taxpayer in an invidious position and that is the point.

 

 

 

 

 

  

 

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Replying to cheekychappy:
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By Dusty
12th Feb 2012 20:07

Hmmph

So...following that line of thought to it's logical conclusion.

Someone enters your business premises and empties the safe. 5 staff have keys. You interview them one by one. Four are completely open with you. They offer up everything they can think of to help. At that time they were in the cinema watching Pinnochio with their 7 yr old (that sort of thing)

One of them closes up. He is not prepared to tell you where he was on that day and says it is none of your business.

Following your line of thinking, the attitude of number 5 is not going to make you at all suspicious that he has something to hide.

Basic psychology says you've raised unnecessary suspicions in the mind of the inspector when your client was doing an admirable job of allaying suspicion by illustrating he had nothing to hide.

Nick Graves wrote:

Jumping in shows we aren't going to play that game - any transaction is guilty until proven innocent in HMRC's eyes, as we well know.

I accept your paranoia may be the result of bad experience but it seems you no longer see HMRC inspectors as human beings doing a job. That's not called accountancy. It's called prejudice.  

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By Nick Graves
12th Feb 2012 20:27

Reductio ad absurdum

is a logical fallacy.

I've made it abundantly clear I do not have a problem with HMRC officers carrying out their jobs - I was merely using an example of how a minor awkward situation of what might become a bigger problem for others under different circumstances.

Unfortunately, you seem to be focussing on the minutiae (almost to the point of ad-hominem) rather than the wider point.

 

 

 

 

 

 

 

 

 

 

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By johnjenkins
13th Feb 2012 10:25

@Nick & Dusty

Some years ago, when we used to have "normal" investigations, one of my clients' was picked.

The client was living on his own, earning reasonable money, however HMRC didn't think he had enough money to live on (they always used to come up with some stupid excuse to investigate in the days before "no excuse needed"). They were sent all documentation and asked for the "meeting" Knowing Brian very well I told him to go to the meeting on his own. He was frightened, because he felt he might be intimidated, but I managed to convince him.

Tax Officer starts, "right we don't think youre earnings match your expenditure"  "but you've got my expenditure"  "Ah but we don't believe it to be true, for example we have an estimated gas and electric bill for your flat in the sum of..........". At that stage Brian got out of his chair, snatched the paper out of Inspectors' hand looked at it and said "all these are made up aren't they?  "no they are estimates on what we think"  "no they are made up because I don't have takeaways and my flat is all electric". With that Brian ripped the paper up and walked out. A Couple of weeks later we had a letter saying that in future better records should be kept but the investigation was closed.

The point of telling you this story is. That whatever we do and however we do it, is not going to make an iota of difference to what HMRC think. They have their own agenda and will be looking for ways to increase "the take". They are trained that way. The only people I found to be genuinely honest in their "visits" were customs and excise educational.

We have to protect our client however we can.

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By The Black Knight
13th Feb 2012 13:39

R?

but which would you rather have.....Mr Grumpy who invariably does not know his stuff and is easily dealt with.....or someone good ? (I say that loosely)

 

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By Dusty
13th Feb 2012 21:52

@Nick and John

Ab absurdo  

1) any transaction is guilty until proven innocent in HMRC's eyes, as we well know. 

2) I've made it abundantly clear I do not have a problem with HMRC officers carrying out their jobs .

Is it nitpicking to see a conflict in those two statements?

@John.

I think you've made my point. "some years ago....?"

Every profession has its idiots. Nice to know they're few and far between.

If (and I say if) "any transaction is guilty ...in HMRC's eyes" then the fault lies squarely with the sheer numbers of people who are trying to evade paying tax.

In exactly the same way that Nick's experience has allowed him to tar all HMRC employees with the same brush, some HMRC employees will have met so much evasion and antipathy that they will come across as described by Nick.

I've only met the nice ones. I'm a friendly person. I think there's probably some conclusion to be drawn there.

Has no one else ever noticed that there's a definate correlation between Monday morning and stroppy customers? It's not just them..........

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Replying to The Highlander:
By Nick Graves
15th Feb 2012 11:30

Inference, not a conclusion!

Dusty wrote:

I've only met the nice ones. I'm a friendly person. I think there's probably some conclusion to be drawn there.

Yes, I suspect we can.

Over & out.

 

 

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By johnjenkins
14th Feb 2012 09:51

@Dusty

"some years ago" but the thought pattern hasn't changed. There is nothing wrong with most HMRC officers, it's the way they are trained. Why do you think they have pulled back from the business records fiasco? Because they are not getting the results they were hoping to find, because contrary to a lot of opinion most tax payers keep adequate records and are honest.

One of the main problems with  HMRC over the GB years was this trying to merge Tax avoidance and tax evasion. It's still a problem which is causing HMRC and Accountants immense trouble.

So as I previously said when HMRC come back they will be picking holes "big time".

In short there is a lot of Legal tax avoidance but not much illegal tax evasion.

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By MartinLevin
14th Feb 2012 12:50

The GoodEnglish Professor opines

Having started a career in Accountancy in November 1963 (yes it IS a long time ago), I've seen them come - and I've seen them go.  I've also seen a huge WASTE in the Public Sector that the Media seemingly fail to pick-up on. Our function, as Accountants, is to try to, not only minimize a client's tax bill (that's called tax planning); but also trying to keep the TaxMan and the Client as "strangers".  It works once you have good records.  See my earlier post about ABC Accounts Books. 

As accountants, we ought to set standards.  The use of Good English means do not use jargon.  These posts can be read from anyone - and so it demeans outsiders to see slovenly English (undefined initial letters, misspelt words, poor grammar) on sites such as this.  Please use spell-check, etc. 

I commend www.Conjunctivitis.com - now THAT's a site for sore eyes.

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By BobEdwardsLandmark
04th Mar 2012 16:22

Look for the opportunity

However you view the BRC programme, as a nuisance, an irrelavance, badly manged and so on, it does show up as a problem for business owners. Practitioners should always be on the lookout for these "problem" areas.

In my opinion firms should be focussing their attention on improving their clients' record keeping in order to benefit their clients' businesses and NOT to fret unduly about HMRC's agenda.

For instance improving record keeping will facilitate:

1. Faster production of management information.

2. Faster turn-a-round of interim and year end accounts prep so additional tax planning advice can be more effecitively applied.

3. Lowering of compliance fees and freeing up time to discuss tax saving issues not the problems associated with balancing the cash account.

What I am suggesting is a client focus. We have to keep our eye on our friends at HMRC but let's not forget who we are in business to serve...

 

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