HMRC announced yesterday that a re-launched business records checks programme will follow a new ‘step-by-step’ approach with a ‘much greater emphasis on education and support’. The department had listened to businesses and agents and revamped the programme to make it ‘more streamlined, targeted and better focused on education’.
But the Chartered Institute of Taxation responded by warning that a ‘fundamental concern’ remains about in-year penalties for self-employed taxpayers who keep records below the standard HMRC considers adequate. ‘In our view it is questionable whether HMRC have the power to do this,’ said Patrick Stevens, CIOT president. It was unrealistic to expect smaller businesses to have perfect records written up every day.
‘Tax agents, and the businesses they advise, need to work closely with HMRC and ensure that, following any BRC visit, any conditions set by HMRC and accepted by the business are fully achievable. They must also check before any revisit that the conditions have been complied with, otherwise a penalty may be charged.’
Stevens added: ‘Tax advisers are strongly supportive of efforts to improve record keeping by business, but up until now HMRC have been going about it the wrong way, increasing burdens disproportionately. A good programme to improve business record keeping will involve HMRC and tax advisers working together to educate business about good practice and support them in improving their systems, as well as warning about the risks of poor record-keeping.’
Anthony Thomas, chairman of the Low Incomes Tax Reform Group, said: ‘We continue to be extremely concerned that HMRC are creating an impression, wrongly in our view, that these records checks are mainly for educational purposes. It is critical that businesses understand that these are serious compliance checks with potentially large penalties being levied on those who keep poor business records.’
The programme will be rolled-out region by region over 14 weeks, HMRC said.
‘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 announced yesterday that a re-launched business records checks programme will follow a new ‘step-by-step’ approach with a ‘much greater emphasis on education and support’. The department had listened to businesses and agents and revamped the programme to make it ‘more streamlined, targeted and better focused on education’.
But the Chartered Institute of Taxation responded by warning that a ‘fundamental concern’ remains about in-year penalties for self-employed taxpayers who keep records below the standard HMRC considers adequate. ‘In our view it is questionable whether HMRC have the power to do this,’ said Patrick Stevens, CIOT president. It was unrealistic to expect smaller businesses to have perfect records written up every day.
‘Tax agents, and the businesses they advise, need to work closely with HMRC and ensure that, following any BRC visit, any conditions set by HMRC and accepted by the business are fully achievable. They must also check before any revisit that the conditions have been complied with, otherwise a penalty may be charged.’
Stevens added: ‘Tax advisers are strongly supportive of efforts to improve record keeping by business, but up until now HMRC have been going about it the wrong way, increasing burdens disproportionately. A good programme to improve business record keeping will involve HMRC and tax advisers working together to educate business about good practice and support them in improving their systems, as well as warning about the risks of poor record-keeping.’
Anthony Thomas, chairman of the Low Incomes Tax Reform Group, said: ‘We continue to be extremely concerned that HMRC are creating an impression, wrongly in our view, that these records checks are mainly for educational purposes. It is critical that businesses understand that these are serious compliance checks with potentially large penalties being levied on those who keep poor business records.’
The programme will be rolled-out region by region over 14 weeks, HMRC said.
‘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.’
