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HMRC announces ‘fresh approach’ to Business Records Checks

HM Revenue & Customs (HMRC) will be adopting a ‘fresh approach’ to its Business Records Checks programme, following a recent review of the system.

Under a pilot scheme launched in April 2011, HMRC had been carrying out checks on the adequacy of the statutory business records kept by small and medium-sized businesses, with the aim of improving standards of record-keeping and reducing levels of underpaid tax.

The scheme found that 28% of businesses visited had an issue with their record-keeping, while an additional 11% had issues that were serious enough to require a follow-up visit.

HMRC had originally planned to carry out a further 20,000 checks on small businesses during 2012/13, but recently announced that it would be conducting a strategic review of the project, following concerns voiced by trade and professional bodies over the additional burden being imposed on compliant businesses.

While HMRC will carry out any visits or follow-ups which have already been booked, all new checks will now by postponed until the new approach is launched, early in 2012/13.

When the programme restarts, those businesses considered to be at ‘high risk’ of keeping inadequate records will initially be contacted by telephone or letter, and asked about their record-keeping systems. HMRC will then determine which of those businesses require a visit. If the records are found to be seriously inadequate following a visit, a business will be given reasonable time to get their records in order before a follow-up visit.

The taxman has the ability to levy penalties of up to £3,000 for inadequate record-keeping, although HMRC will be consulting with business and trade organisations to identify a ‘reasonable tariff’ for those occasions when penalties are issued.