HMRC finalises 'improved' Business Record Checks

A Business Record Checks letter that taxpayers suspected of lax paperwork will receive is being prepared by Revenue & Customs, under a new three-step approach to BRCs bearing a fresh penalty regime.

Minutes from ABAB, a forum of officials, businesses and their advisors, confirm that HMRC’s “improved” approach to checking whether an individual’s paperwork is “adequate” will hinge on a document sent to them by post.

It will represent the second step in HMRC’s “triage” approach to BRCs – after a new risk profiling process identifies the suspect but before the third step - telephone contact from an HMRC official, state the minutes.

The ABAB meeting heard that such a call from the taxman is intended “to help de-select” the cases that require a BRC inspector to visit, in line with HMRC’s aim to make the initiative less heavy-handed for taxpayers and more resource-friendly for the department.

Final touches to a fresh penalty regime, including in what circumstances they will be apply, are also being made, following HMRC’s acceptance to look at a “reasonable tariff” for BRC, alongside the maximum penalty of £3,000.

At the meeting, accountant and businesswoman Teresa Graham, chair of the Administrative Burdens Advisory Board, said the level of penalties was “a real concern”, so much so that the mere threat of one may make firms feel they need representation.

Alongside her warning of “reputational damage” to HMRC if it gets “the penalties issue wrong”, leading tax expert John Whiting suggested that the level of liability wasn’t actually the real “nub of the issue”.

Rather, it is whether small businesses that have kept enough documents to fill in and submit their tax returns would still be vulnerable to a penalty “just because the records were not written up immediately,” he said.

More generally, the “overall image” of the paperwork-checking initiative is concerning, HMRC was told, amid fears from enterprise that BRC will merely be a ‘way in’ for the taxman to scrutinise other areas of their business.

The minutes attest: “Nobody had any difficulty in HMRC coming down hard on those who completely flout record keeping requirements – indeed there would be a lot of support for such actions – but there was wide concern that HMRC had much wider targets.”

Elsewhere at the meeting, HMRC was asked about a timeline of what it is trying to achieve relating to de-selecting cases, yet the overall timetable appears the same, with revamped BRCs due to begin in the start of the 2012-13 financial year.


17th October 2012

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