Scrapping of business record checks “a victory for common sense”

The Chartered Institute of Taxation (CIOT) has welcomed the news that HM Revenue and Customs (HMRC) are to scrap Business Record Checks.

Business Record Checks are a compliance procedure HMRC use when they want to confirm that a business is keeping sufficient information on its income (sales) and expenses to produce an accurate tax return.  They have been criticised for being ineffective and poorly targeted.

Andrew Gotch, Chairman of the Chartered Institute of Taxation’s Owner Managed Business Sub-Committee, commented:

“This announcement is a victory for common sense.

“Tax advisers are strongly supportive of efforts to improve record keeping by business but, as HMRC themselves acknowledge, this initiative has not proved a cost-effective way of achieving the desired result. Despite efforts by HMRC to identify businesses at ‘high risk’ of having inadequate records most of those they called on were found to be keeping records to an acceptable standard. The evidence is that records are being kept to an appropriate standard by most small businesses in the UK.

“We hope this signifies a more realistic approach from HMRC to the perceived problem of small business record keeping. An educative approach, with initiatives such as HMRC’s online learning packages, is a much more sensible way forward in helping businesses keep adequate records to enable them to produce accurate tax returns when these are required. The CIOT and our members are keen to work with HMRC to ensure the quality of educational products is as high as it can be.”

The CIOT has warned business owners that keeping good records is still essential to enable them to produce accurate accounts and tax returns. Andrew Gotch said:

“Scrapping Business Record Checks does not mean HMRC are going to get laxer on tax compliance by small business. It remains crucial for businesses of all sizes to keep records up to date and in good order. This is likely to become even more important as HMRC bring in digital tax accounts, which may require businesses to submit data more frequently.”

Along with the CIOT, Association of Taxation Technicians and other professional bodies, the CIOT’s Low Incomes Tax Reform Group has been involved in discussions with HMRC over the future of Business Record Checks. The Group’s Chairman, Anthony Thomas, commented:

“Pulling the plug on Business Record Checks is certainly the right decision.

“HMRC have gone about trying to improve business records in completely the wrong way. A lot of public money and businesses’ time has been wasted going through checks which, as HMRC’s own research shows, were not necessary in the vast majority of cases.

“We have consistently argued over a long period with HMRC for an approach focused on educating new businesses about good practice rather than trying to catch them after they become non-compliant. We hope today’s move means HMRC are now on board with this approach too.”

Notes for editors

1. The Chartered Institute of Taxation (CIOT)

The 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 17,500 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.Low Incomes Tax Reform Group

2. Low Incomes Tax Reform Group

The LITRG is an initiative of the Chartered Institute of Taxation (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.