After a false start, HMRC has re-launched its Business Record Checks (BRC) programme. You don’t need to panic, just make sure you understand what the checks are and how they could affect you.
According to HMRC: “Businesses need to keep records to complete their tax returns correctly, and pay the right amount of tax at the right time to avoid interest and penalties.”
Whilst this is very true, a more fundamental reason for a business to keep good records is to measure performance and progress.
So, if you are running a business but not keeping good records then now is the time to get some help and fix the problem so that you know what shape your business is in, and so that there aren’t any problems should HMRC contact you as part of the BRC programme.
How do Business Records Checks work?
HMRC is targeting businesses they believe might be at risk of not having adequate records. This is a computer-driven selection process that cannot be added to manually by local HMRC staff.
If your business comes up on the list, HMRC will firstly conduct a telephone interview to find out what records you are keeping, and the process may stop there if they are satisfied you are keeping good records.
If HMRC thinks you need a bit of help, they may contact you again via their Business Education and Support Team. Alternatively, they may decide to look further and visit your business.
During the visit the HMRC officer will:
- ask you to explain how you run your business
- note how you keep your business records
- check a sample of your current business records – usually your records for the last four months – and arrive at a decision as to whether your business records are adequate or not
Penalties for poor record-keeping
There are two outcomes of the visit – you are either keeping adequate records or you are not.
Up until 17 February 2012, before the original campaign was put on hold, 3,431 Business Record Checks had been carried out and, according to HMRC, these found that 36% of businesses had some issue with their record-keeping, of which 10% had issues serious enough to warrant a follow up visit.
If your record-keeping is found to be inadequate then HMRC can begin to issue penalties up to £500, although these can be cancelled if you show within three months that you have rectified the problems and are maintaining adequate records going forward.
Where inadequate records are found, HMRC may visit you again within two years to re-check.
Be ready for a Business Records Check
The simplest approach is to keep adequate business records and ensure your bookkeeping is up to date and your payroll and VAT affairs are in good order.
Use a bookkeeper or an accountant for expert advice and get a good accounting software package such as QuickBooks to keep on top of your financial records.
The message is clear: if you want to avoid the pain of a BRC – you should be doing …what you should be doing anyway!
We’ll be doing more on keeping good records soon – stay tuned!
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
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