Business records checks ― overview

By Tolley in association with Guy Smith of inTAX Ltd

The following Personal Tax guidance note by Tolley in association with Guy Smith of inTAX Ltd provides comprehensive and up to date tax information covering:

  • Business records checks ― overview
  • The old business records check programme
  • What did HMRC do?
  • What did the BRC visits involve?
  • Penalties
  • What is the current state of play?

Business record checks were relaunched in November 2012. This guidance note considers the previous regime, which was introduced in February 2011 and suspended in February 2012.

For details of the new business record checks programme, see the HMRC relaunches business records checks news item.

The old business records check programme

The business records checks (BRC) programme has proven to be one of the more controversial initiatives launched by HMRC in recent years, almost from the moment the consultation document  invited feedback in December 2010.

HMRC wanted to test both the adequacy and accuracy of business records maintained by sole traders, partnerships and limited companies trading within the small and medium enterprise (SME) sector. HMRC considers SMEs to be those businesses with an annual turnover below £30 million and employ less than 250 people.

Falling back on its own internal research from random self assessment enquiries and studies conducted by the Organisation for Economic Cooperation and Development (OECD), HMRC justified the need for the programme by saying poor business record keeping was responsible for a loss of tax in up to two million SME cases annually.

Key objectives listed in the consultation document were to:

  • use the tax legislation at FA 2008, Sch 36 to check up to 50,000 businesses’ records annually
  • help improve the understanding of SMEs as to their statutory record keeping obligations, ensuring their compliant behaviour moving forward
  • impose financial penalties for significant record keeping failures in order to reduce tax losses to the Treasury, and
  • explore the interaction between the record keeping requirements for different taxes and clarify the different financial penalties for any failures
What did HMRC do?

The consultation on the BRC programme was supposed to conclude

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