BRC relaunch

Business Records Checks (BRC) are being re-launched by HMRC today, following a review and stakeholder consultation. The redesigned checks process will be rolled-out on a region by region basis between late November 2012 and early February 2013.

A pilot programme of business records checks began in April 2011 but the process was halted for a review following strong representations from the business community over flaws in the BRC pilot programme.

The redesigned Business Records Checks programme now involves a new step-by-step approach, with a greater emphasis on education and support. From today, HMRC will send letters to businesses it believes may be at risk of keeping inadequate records, advising the business that HMRC will be phoning them to discuss their business records.

This call will then take the customer through a set of questions to assess the customer’s record-keeping affairs. Depending on the outcome of this conversation, HMRC will then determine whether the customer could benefit from tailored educational support and whether a Business Records Checks visit is necessary.

Where a visit reveals the customer is keeping inadequate records, HMRC will provide guidance on what the customer needs to do to improve their record keeping. HMRC will then arrange a follow up visit, normally three months later, giving the business a reasonable time to make the necessary improvements to their record-keeping processes. If, on the second visit, the records have not improved to an adequate standard, then HMRC may charge a penalty.

HMRC’s Director of Local Compliance, Richard Summersgill, said:

‘The visits offer benefits for businesses at risk of keeping inadequate records. Adequate records help businesses pay the right amount of tax at the right time, thereby avoiding interest and penalties for errors and late payment, whilst also giving HMRC greater assurance when a business submits its tax returns.’

Some are still apprehensive about the BRC regime, warning that small firms are most likely to be targeted and affected.

Commenting, Patrick Stevens, CIOT President, said:

‘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.’

‘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.’

Further details are available from HMRC.