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 Even more reason to insure against tax enquiries:

TAXMAN APOLOGY OVER RECORD CHECKS PILOT

A pilot scheme of checks of small and medium-sized firms’ business records has been launched, HMRC have confirmed, following complaints that the department had begun proceedings prematurely.

The recent consultation on the matter suggested a trial period and indicated that such an undertaking would need to be publicised. The letters sent out recently by the Revenue to firms did not indicate that they were part of the tester scheme only. The department has agreed to provide clearer information in future correspondence.

HMRC have apologised to the professional accountancy bodies for not providing clarity before launching the trial record checks. The taxman has also confirmed that no penalties will be charged for record keeping failures during the pilot, the results of which will be considered alongside feedback from the consultation before a full programme of work begins.

In a briefing sent to the pro bodies, the Revenue said, ‘The purpose of HMRC's BRC [business record checks] initiative is to improve the record-keeping procedures of small and medium business customers and thereby develop those customers' ability to comply with their statutory record-keeping obligations.

‘Following a recent consultation document period, ending in March 2011, HMRC is testing BRC in a limited way between 4 April and 15 July 2011. HMRC confirm that no BRC activity took place during the consultation period.’

The briefing continued: ‘The test of BRC involves 30 HMRC staff in eight locations (Edinburgh, Irvine, Manchester, Liverpool, Stockport, Sunderland, Sheffield and Portsmouth). It is estimated that up to 1,200 BRC visits will be undertaken in this period depending on the outcomes of the early stages of the trial. BRC cases will be selected using HMRC’s existing risk engines and procedures.

‘HMRC would like to clarify that the BRC initiative does not insist on a specified format for business records, but checks whether the records of all business income and outgoings are recorded in a way appropriate for the size and nature of the trade.’

The Revenue acknowledged concerns about the additional time and cost burdens placed on firms by the checks, but said it expected them to be outweighed by the long-term benefits of having good record-keeping routines in place.

‘HMRC would also like to confirm that it has no intention of charging any penalties for record keeping failures during the current phase of testing and continues to review its long-term planning around the introduction of such charge in the future,’ said the briefing sent to accountancy bodies.

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