In-year BRC penalties put in doubt

The Business Records Checks programme run by Revenue & Customs should not be able to penalise inadequate paperwork unless it causes a return to be incorrect, a leading tax body says.

Speaking over the weekend, the Chartered Institute of Taxation said simply failing to keep records to an adequate standard does not, in its view, constitute sufficient grounds for firms to be fined by HMRC’s BRC officers.

Andrew Gotch, chairman of the CIOT’s Owner-Managed Business sub-committee, said: “It is hard to see a legitimate basis for charging a penalty until it is demonstrated that the return is wrong for a record-based reason.”

His comments indicate that despite the taxman agreeing to operate a more ‘reasonable tariff’ under the BRC – where penalties of up to £3,000 are possible – the advisor is unsure whether HMRC has the power to issue in-year penalties.

The CIOT has explained: “We think a penalty [under BRC] can and should only be raised once it has been proved beyond reasonable doubt that the bookkeeping records cannot support the submitted return. Therefore any penalty needs to be linked to an incorrect return”.

Under the current BRC regime, the penalty for businesses found to have poor records who have not taken improvement action since HMRC initially found them to be inadequate, and offered its support, is “usually” £500, or £250 if it is their first trading year.

Also according to HMRC, the maximum penalty of £3,000 would apply where the BRC officers find the business to have “deliberately destroyed” records during a check, although it may be only £1,500 if only some records are destroyed.

Mar 5, 2013
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