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 HMRC update on Business Records £3,000 penalties for bad records
 Check trial

HMRC have confirmed that a Business Records Checks (BRCs) trial has started. Following receipt of comments from some members that these real time checks had started, immediately after the end of the consultation and before the responses had been fully analysed, the CIOT secured a meeting with HMRC to seek clarification.

The recent BRCs consultation had suggested the idea of a trial, although it also indicated that there would be a need for a means of publicising checks. It transpires that the letters sent out recently are part of the trial, although the letters to taxpayers and their agents do not indicate this. However, HMRC have agreed to change further letters going out to make this clear.

In addition, HMRC have now confirmed that there is no intention of charging any penalties for record keeping failures during the trial. The CIOT understands that results of the trial, together with the feedback from the consultation, will be considered before any full programme of work commences. We hope HMRC will work with the professional bodies on this as we continue to have concerns about this project, as highlighted in our recent response to HMRC.

The CIOT is keen to receive feedback from members with clients involved in these checks, as to their experience and the outcome – please send and feedback to Tina Riches at  triches@ciot.org.uk.

HMRC have apologised for not providing more clarity before the 'test and learn activity' commenced. The HMRC message is copied below.

START OF HMRC MESSAGE

Business Record Checks (BRC) Briefing Paper to main accounting bodies 08/04/11

The purpose of HMRC's BRC 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 test of BRC involves 30 HMRC staff in 8 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 HRMC's existing risk engines and procedures.

HMRC thanks CIOT and ICAEW for their helpful intervention on the design and development of the BRC process and apologises that, though it was referred to at agent body consultation workshops in London and Glasgow in March 2011, communication the trial nature of current BRC activity did not extend to the wider agent community as clearly and effectively as HMRC would have liked. HMRC are reviewing their communications around BRC and adapting their correspondence to customers regarding BRC to empasise the trial nature of the activity.

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 ina way appropriate for the size and nature of the trade.

HMRC understands concerns around the additional burden placed on businesses by the introduction of the BRC initiative, but expects that additional burden, in terms of time and cost, to be outweighed by the long term benefits for businesses 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. Again HRMC is grateful for agent body input into that planning.

HMRC would like to provide the agent bodies with assurance that its staff involved in BRC activity have received supporting study packs and attended face to face learning events written and delivered by experienced compliance trainers. All BRC learning materials have been reviewed by senior HMRC technical and learning managers.

HMRC intends to continues to work together with agent bodies on improving record keeping by businesses and the risks involved in businesses applying poor record keeping procedures. Within this context HMRC will continue to speak to agent and business representatives on the development of BRC during and after the current testing phase.

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