HMRC Business Records Checks: Could it be you?

What are Business Records Checks?

The HMRC Business Records Check is an initiative to check that small and medium size enterprises have adequate business records.

The programme was previously halted for a review over flaws in the pilot programme. Patrick Stevens, the CIOT President, said: “HMRC have listened to some of our concerns and recast how Business Record Checks will be carried out, but the fundamental issue of in-year penalties remains”.

The redesigned Business Record Checks (BRC) process will now be rolled-out on a region-by-region basis between November 26 and February 4 2013.

When and where will the Business Records Checks take place?

The BRC programme will be rolled-out, region-by-region, over the following 14-week period:

• South East England – 14 January 2013
• Scotland – 14 January 2013
• Northern Ireland – 14 January 2013
• Central England – 21 January 2013
• East of England – 28 January 2013
• North Wales & the North West of England – 28 January 2013
• South Wales & the South West of England – 4 February 2013

During the pilot HMRC visited 3,431 small businesses and found that while 36% had issues with their record keeping, 10% had serious enough issues to warrant a follow-up visit.

Who is at risk from a business records check?

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.

It is therefore vital that you keep full and accurate records of your income and expenses. Keeping records makes sound business sense and is a legal requirement. So it is important to get a proper system in place from the outset, and update the information regularly. We can help if you require further advice.

What happens if I am selected for a business records check?

If you are selected to be checked, you will receive a letter from HMRC and a follow up telephone call to talk through your business record keeping and which should last around 15 minutes.

Depending on the answers you give on the call, you may be offered some self-help education, or if HMRC think you are at risk of not having adequate records then you may need to have a face to face Business Records Check visit.

I have a face to face Business Records Check, what should I do?

A face to face visit will be likely to last around 2 hours and HMRC will ask for explanations on how you run your business and will want to see samples of your business records.

You should notify your accountant and it would be a good idea to have them present for the meeting. If you are not confident that your accountant is experienced in this area please contact us, we have significant experience supporting and advising businesses throughout various types of HMRC investigations.

If you are viewed to need to improve your business records then a follow up visit will be arranged, and depending on whether you have improved your records you could then become subject to penalties or further visits.