HMRC to review business records checks

by Tax Faculty Team on 03.01.2012 07:18

A fresh look at the project


Tax practitioners and advisers will be aware of HMRC’s Business Records Checks (BRC) project. The idea of a BRC is that an HMRC officer will visit a business, look at the records and see whether they are adequate for producing tax returns. HMRC has been piloting BRCs since spring 2011.


The Tax Faculty and other tax representative bodies have been concerned about BRCs from the beginning. While we support initiatives to help businesses keep good records, we are not convinced that the BRC approach is the best way to achieve this. We are concerned that HMRC may set unrealistic criteria for small business records and that BRCs will place a considerable compliance burden on SMEs and their advisers. Some of our concerns are set out in our response to the initial consultation, published as TAXREP 19/11.


Since the BRC pilot started we have been involved in consultations with HMRC, and Frank Haskew’s editorial in December 2011 TAXline brings things up to date and explains what the Tax Faculty has been doing.


We are therefore pleased that following consultation with the representative bodies, HMRC has announced that it has started a detailed review of the BRC project. The full text of HMRC’s statement is given below. The review will consider various options aimed at achieving the original objective of BRCs, ie to deal with poor record-keeping in the SME sector.


The Tax Faculty will be participating in the review. We are keen to hear members’ views and feedback from those whose clients have been targeted in the BRC pilot. Please post comments below or send them to jane.moore@icaew.com


HMRC’s December 2011 statement about BRCs in full:


“HMRC recognise that the launch of the BRC pilots has caused considerable concern to the tax profession and that the project would have benefited from more detailed consultation with tax professionals at an earlier stage. In the light of these concerns, HMRC will undertake a strategic review of the project in consultation with the professional and representative bodies. The purpose of the review is to consider the overall aims of BRCs, examine whether the current approach is the best way of achieving the policy objectives and identify what changes are needed to ensure that the objectives are achieved. 


“In the meantime HMRC will continue with a limited number of BRC pilots and the results of them will be evaluated as part of the review. Richard Summersgill (HMRC’s Director, Local Compliance) and Naomi Ferguson (Director, Business Customer & Strategy) are jointly sponsoring the review and it will be led by Tracy Kirkham. HMRC will also consult with the professional bodies and other representatives through the Compliance Reform Forum and also with ABAB (the Administrative Burdens Advisory Board). HMRC expect to report initial findings in early 2012.


“Given the concerns over possible penalties, HMRC would like to take this opportunity to reassure taxpayers and agents that HMRC will not (except in extreme cases such as where a taxpayer has no records or has destroyed them) be seeking to use the record-keeping penalty provision during the pilots. No such cases have been identified so far.


“HMRC and the tax profession share the overriding policy objective, namely to ensure that businesses’ record-keeping meets the necessary statutory requirements and that their records are sufficient to enable a correct and complete tax return to be submitted within the time limits. HMRC are grateful to the representatives of business and the agent bodies for agreeing to work with them on the review and look forward to developing a shared understanding of how the overriding policy objective can be implemented with representatives’ full support.”