CIOT: Warning for small firms over resumption of Business Record Checks
The Chartered Institute of Taxation (CIOT) has responded to today’s re-launch of the Business Record Checks (BRC) regime by HM Revenue and Customs (HMRC) with a strong warning for small firms.
HMRC have announced that the redesigned checks process will be rolled-out on a region by region basis between late November 2012 and early February 2013.1 The process had previously been halted for a review following strong representations from the CIOT over flaws in the BRC pilot programme.2
Commenting, Patrick Stevens, CIOT President, said:
“HMRC have listened to some of our concerns and recast how Business Record Checks will be carried out, but the fundamental issue of in-year penalties remains. HMRC have still not provided a satisfactorily clear reasoning to justify their belief that they can charge penalties in-year before the return goes in for keeping records below the standard they consider is adequate. In our view it is questionable whether HMRC have the power to do this.
“HMRC have consulted representative bodies to define more clearly what constitutes ‘adequate’ records and we understand that this is to be included in guidance for HMRC staff. It is important that the approach taken with different kinds of businesses is appropriate. It is unrealistic to expect smaller businesses to have perfect records written up every day.
“Tax agents, and the businesses they advise, need to work closely with HMRC and ensure that, following any BRC visit, any conditions set by HMRC and accepted by the business are fully achievable. They must also check before any revisit that the conditions have been complied with, otherwise a penalty may be charged.
“Unrepresented small businesses need to follow the same recommendation, but may want to take some advice before they sign up to HMRC conditions. Many advisers offer a free initial meeting or pro bono help to those on very low incomes, so it may not be costly to get some help.
“Since the selection process for BRCs is based on risk assessment it is more likely that cash businesses will be chosen for BRCs. Such businesses in particular will need to ensure they are keeping adequate records going forward.
“Tax advisers are strongly supportive of efforts to improve record keeping by business, but up until now HMRC have been going about it the wrong way, increasing burdens disproportionately. A good programme to improve business record keeping will involve HMRC and tax advisers working together to educate business about good practice and support them in improving their systems, as well as warning about the risks of poor record-keeping.”
The CIOT’s Low Incomes Tax Reform Group (LITRG) has also been active in pressing for improvements to the BRC scheme.
Anthony Thomas, LITRG Chairman, commented:
“LITRG has worked with HMRC to recommend a number of safeguarding measures to help unrepresented businesses that are selected for Business Records Checks. These agreed recommendations include allowing family and friends who provide bookkeeping support to an unrepresented business to be involved in initial discussions with HMRC which may result in the business not needing any further records checks or visits.
“We continue to be extremely concerned that HMRC are creating an impression, wrongly in our view, that these records checks are mainly for educational purposes. It is critical that businesses understand that these are serious compliance checks with potentially large penalties being levied on those who keep poor business records.”
Notes to editors
1. Roll Out Schedule for Business Record Checks:
London / London and Anglia – 26 November 2012
South East England / Scotland / Northern Ireland – 14 January 2013
Central – 21 January 2013
East of England / North Wales & the North West – 28 January 2013
South Wales & the South West – 4 February 2013
HMRC have stated that the re-launch will initially involve them writing to customers who they believe may be at risk of keeping inadequate records, advising them that they will be calling them to discuss their business records using a questionnaire. The customer’s response to this conversation will then enable HMRC to assess whether no further action is required, the customer could benefit from tailored educational support, or if a BRC visit is required.
For further information see http://www.hmrc.gov.uk/businessrecordscheck/index.htm
2. Then CIOT President Anthony Thomas and Director, Technical, Tina Riches, met with HMRC in April 2011 to raise a number of concerns about the mis-targeting of the Business Record Checks scheme, the unnecessarily high bar being set by HMRC and the inadequate consultation process. This meeting led to further meetings involving other professional bodies and a review of the programme was announced in December 2011. In February 2012 HMRC announced that checks would be “more targeted in future, linking to available education and support.”
3. The Chartered Institute of Taxation
The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 16,500 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
4. The Low Incomes Tax Reform Group (LITRG) is an initiative of the CIOT to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
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George Crozier
External Relations Manager
D: +44 (0)20 7340 0569
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The Chartered Institute of Taxation
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www.tax.org.uk
The Association of Taxation Technicians
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VAT Registration Number 497 5390 90
www.att.org.uk
Low Incomes Tax Reform Group – an initiative of the Chartered Institute of Taxation
www.litrg.org.uk
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