At the beginning of July this year, tax experts warned small firms that HM Revenue and Customs (HMRC) would be stepping up its controversial Business Record Checks (BRC) consultation process. HMRC have now released their delayed Summary of Responses (SoR) report which contains a subtle, yet a worrying change of tone and attention towards the BRC process. In the opening narrative of the SoR report, HMRC states that Business Record Checks are a ‘compliance check’, not an ‘educational exercise’. From time to time HMRC will carry out Compliance Checks to make sure businesses are paying the right amount of tax. HMRC are supposed to give one week’s notice but they may decide that a surprise visit is ‘appropriate’.
Commenting on the BRC process, a spokesman for HMRC, said:
“Business Record Checks are intended to address the problem of those who, despite the help available, continue to fall significantly short of compliance with their record keeping obligations.
“There is already help and guidance available for businesses to enable them to fulfil their recordkeeping obligations.”
The change in tone towards BRC is in response to research from HM Revenue and Customs, which suggested poor record keeping, is amongst the most important reason for underpayment.
To tackle this problem, HMRC plan to check the records of 50,000 small and medium enterprises (SMEs) over the next six months, to see if they are ‘accurate and adequate’ for tax purposes.
HMRC hopes to raise £600 million from the four-year initiative. To reach this goal 200,000 SMEs will have to be issued with a £3,000 fine.
Although now only in a ‘trial’ phase, the HMRC has been criticised by business and accountancy groups for going back on its word not to hand out fines. Already one business has been issued a £3,000 fine for failing to keep a £25 invoice for a bunch of flowers. It seems the actions of inspectors could be worrying for business owners, as reports suggest that fines will be issued for relatively small errors. So far spot checks have been carried out in Edinburgh, Manchester, Liverpool, Sheffield, Stockport, Portsmouth, Sunderland and Irvine. From the 15th of July is expected that visits will be rolled out nationwide.
With HMRC continuing to tighten the net on underpayment, now is the time to get your business records in order. There are a high percentage of tax Checks that turn into more serious tax investigations. Having a tax expert on your side from the very beginning can make a massive difference so why risk it?!
If your business is facing a Business Record Check from HMRC, call KinsellaTax on 0800 471 4546 straightaway. Our tax enquiry experts are here to take your call 24 hours a day so pick up the phone and dial now. Compliance Checks can be worrying and stressful for everyone concerned; Pass the worry on to us.