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HMRC today relaunched their business records checks (BRCs) – and were immediately criticised for not addressing some of the problems that led to the scheme’s hiatus earlier this year.
The newly tooled BRCs initiative – to be rolled out across the UK a few areas at a time – will take a step-by-step approach with greater emphasis on education and support, according to the Revenue.
The department has begun to send letters to firms it believes may be at risk of inadequate paperwork, advising that an official wishes to assess the matter via a phone interview, after which a decision will be made about whether or not the taxpayer organisation could benefit from “tailored educational support”.
“We’ve listened to businesses and agents, and revamped our programme to make it more streamlined, targeted and better focused,” said a spokesperson for the taxman.
But the Chartered Institute of Taxation (CIOT) warned that the main point of contention remains from the original BRCs that were unveiled in January 2011.
“HMRC have listened to some of our concerns and recast how checks will be carried out, but the fundamental issue of in-year penalties remains,” said CIOT president Patrick Stevens.
He believes the Revenue is yet to provide a clear reasoning to justify charging fines in real time, before the accounts forming the basis for a tax return have been prepared.
“In our view, it is questionable whether HMRC have the power to do this,” added Stevens, urging the department officials to vary their approach to ensure it is appropriate to whichever type of firm is being scrutinised.
“It is unrealistic to expect smaller businesses to have perfect records written up every day,” said the CIOT president.
His colleague Anthony Thomas, chairman of the Low Incomes Tax Reform Group, expressed deep concern that the taxman is creating the false impression that checks will be mainly for educational purposes.
“It is critical that businesses understand these are serious compliance checks with potentially large penalties being levied on those who keep poor business records,” he said.
Professional bodies, tax advisers and businesses slammed have repeatedly panned BRCs from their outset. The CIOT called them a “blunt instrument” that would fail to reach its objective of ensuring small and medium-sized enterprises maintained adequate business paperwork.
The Revenue had intended to use powers granted by Finance Act 2008 to investigate 50,000 SMEs every year for four years, charging penalties of up to £3,000 for substandard record-keeping.
The plans were placed under review a year after being announced, and put on hold a month later.
