UK (MMD Newswire) February 3, 2012 -- The review, which included discussions of the pilot programme with trade and professional bodies' representatives, found clear evidence that it is effective in improving record-keeping practices in smaller businesses. However, it recommended that the checks are more targeted in future, linking to available education and support.
The pilot programme of business records checks (BRCs) began in April last year and involved checks by HMRC on the standard of small and medium-sized enterprises' statutory business records. Up until 4 January 2012, 2,437 business records checks had been carried out. These found that 28 per cent of those businesses visited had some issue with their record keeping, and an additional 11 per cent had issues serious enough to warrant a follow-up visit.
HMRC will now postpone making any new business records check appointments until the revamped approach outlined in the report is launched early in the 2012/13 financial year. This will allow further consultation with representative bodies on the implementation of the recommendations in the review and on some details of the new approach. In the interim, HMRC will only undertake visits already booked, as well as follow-up visits to businesses that have already been identified as having seriously inadequate statutory records.
HMRC's Director of Local Compliance, Richard Summersgill, said:
"Four out of ten businesses had an issue with their business records, and of those that required a follow-up visit, we found that some 90 per cent subsequently improved their record-keeping.
"However, after reviewing the pilot programme and listening to the views of businesses and representative bodies, we acknowledge the need for a fresh approach to business records checks.
"The BRC visits provide benefits for the business and HMRC. We want businesses to pay the right amount of tax at the right time, avoiding potential interest and penalties. The checks also give greater assurance to HMRC when the business submits its tax returns."
Note to editors
1. The full findings of the HMRC review of its business records checks programme are published today on its website at http://www.hmrc.gov.uk/businessrecordscheck/review.pdf
2. HMRC will announce the start date for the new records checks regime prior to its launch.
3. For further information on record-keeping, visit www.hmrc.gov.uk/record-keeping
4. A Business Records Checks consultation document was issued on 17 December 2010, with a consultation period ending on 14 March 2011. It sought views on how BRCs could help improve the standard of record-keeping across the SME population. As part of the consultation process, workshops were held with accountancy bodies in February and March 2011. HMRC's Summary of Responses was issued on 13 July 2011 after further discussions with accountancy bodies. An accompanying brief was issued at the same time, which addresses additional questions and comments outside the scope of the consultation document itself.
5. When the programme re-starts, businesses considered to be at a higher risk of keeping inadequate records will initially be contacted by HMRC, by phone or letter, and asked about their business records. From this contact, HMRC will consider whether the customer is using appropriate record-keeping systems, and identify those businesses that require a BRC visit. This initial contact will help to target those businesses that really need the help provided by a BRC visit and will reduce any burden on already compliant businesses.
* If an initial visit finds a business's statutory records to be seriously inadequate, a follow-up visit will be arranged, giving them a reasonable time to get their records in order. If the records have still not improved and still demonstrate serious inadequacies, the visiting officer may refer the business for a full tax return check. If that check uncovers an incorrect return, and the inaccuracies are linked back to poor records, a record-keeping penalty would be issued.
* Alternatively, in the unlikely event that an initial visit reveals absolutely no records at all, or that the customer has deliberately destroyed records to prevent or frustrate the check, a record-keeping penalty could be levied.
6. Although the law allows for penalties of up to £3,000, HMRC will be consulting with business and trade representatives to identify a reasonable tariff for those occasions when penalties will be issued.
7. Follow HMRC on Twitter @HMRCgovuk
NAT10/12
Issued by HM Revenue & Customs Press Office