HMRC’s Business Record Checks still 'not working'
In fact, out of the 5,515 companies that faced a BRC in the year to April 2014, precisely 73 per cent were found by HM Revenue & Customs to have no significant errors or anomalies in their records.
This means that despite the number of firms being selected for a spot check rising by 60 per cent in the 10 months from April 2011(when 3,431 firms had a BRC), the strike rate for the department has since reduced.
That’s even though HMRC has been taking a more targeted approach to the checks, which were first introduced in 2011 but suspended for review early the following year because most firms it visited had records that it deemed ‘adequate.’
For those with errors or anomalies, HMRC can impose a potential £3,000 fine on them, in addition to any unpaid tax, interest and penalties. Based on these channels, it has projected a yield from BRC of £49m for 2013-14.
As the department forecasted more conservative earnings of £13m from BRCs in 2012-2013, the rise in checks in the year to April 2014 could have been anticipated by businesses and their advisers.
But the growing number of BRCs now being carried out is a reminder to accountants to double-check that their clients’ records are well-maintained, says PFP, a tax investigations group behind the data.
“These Business Record Checks are a worry for small businesses, because they don’t have the time to sit in on HMRC as they undertake the checks”, reflected PFP’s managing director Kevin Igoe.
“After the review, HMRC said it would try to reduce the burden on compliant businesses by using a more targeted approach. However, the majority of those being reviewed are finding that their business records are sufficient.”
The investigations group says that the rise in compliant firms (64% of BRC targets had no errors in paperwork in 2011-12, compared with 73% in 2013-14) shows that HMRC’s revised method “has not worked.”