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HMRC today re-launches Business Records Checks (BRC), following stakeholder consultation and a review. Its redesigned checks procedures will be rolled-out region by region between late November 2012 and early February 2013.

The initial pilot scheme of business records checks started in April 2011 but was halted for a review following strong representations from the business sector over flaws in the BRC pilot.

This redesigned BRC scheme has a new step-by-step approach, with a greater emphasis on education and support. From today, HMRC will be sending letters to businesses which it believes may be failing to keep adequate records, advising those businesses’s that HMRC will be contacting them to discuss their business records.

This call will consist of a check-list of questions to assess the viability of a business’s record-keeping. Depending on the result of this assessment, HMRC will then decide if the client will benefit from bespoke educational support and if a BRC visit is necessary.

If a visit reveals the business is keeping inadequate records, then HMRC will provide guidance on what the client is required to do to improve their record keeping. A follow up visit, normally three months later, will determine if the clients records have improved, failure to improve to an adequate standard, may result in HMRC charging a penalty.

Richard Summersgill, HMRC’s director of local compliance, 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, while also giving HMRC greater assurance when a business submits its tax returns.

Within the business community there are some who are still apprehensive about the BRC regime, warning that small firms are most likely to be targeted and affected.

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 BRCs 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.’