Business Records Checks (BRC)

Mitchells provide a range of advisory and support services to business owners in the Cheltenham and Bristol area. Here we look at the latest developments relating to Business Records Checks.

The BRC programme was launched on 1 November 2012. Businesses that are more likely to be at risk of having inadequate records are being contacted by letter to arrange for HMRC to call them to go through a short questionnaire.

Depending on the outcome of this call, HMRC will confirm to some businesses that no further action is required. Where some issues are identified, businesses will be offered targeted self-help education options. Businesses that are at risk of keeping inadequate records will be referred for a BRC visit.

There are various possible outcomes of the BRC visit. The records may be found to be adequate, in which case that will be the end of the BRC. The records may need to be improved, and the business is at risk of having to pay a record-keeping penalty. However, there will be an opportunity to bring them to an adequate standard, with as much help and support as is needed. If, at the follow up visit (3 months later), the record keeping has improved sufficiently, the penalty will be reduced to nil.

If the records have not improved adequately, a penalty will apply. This is usually £500 for the first offence; for businesses in their first year of trading the penalty will be £250. If the visit shows that records have been deliberately destroyed, a penalty of £3,000 would apply (£1,500 if only some of the records are destroyed).

In the case of inadequate records, HMRC will refer the business for another BRC in two years' time. If the records are again found to be inadequate, the business will have to pay a new penalty. If during the BRC, HMRC identify that tax returns may be inaccurate, or that the business needs to register for VAT, PAYE or the Construction Industry Scheme, they will pass details to the appropriate team.

What's happened so far?

BRCs were devised to tackle poor record-keeping in small businesses, leading to incorrect tax returns, which HMRC believe was resulting in a significant loss of tax revenue. HMRC found that in the latest phase of BRCs, many of the taxpayers have been keeping records correctly. Those whose records were not adequate on first inspection, and who received follow-up visits, all improved their record-keeping standard. HMRC has not charged any penalties.

What next for BRCs?

From 4 November 2013, HMRC's BRC activity in the Edinburgh, Glasgow, Leeds, Bradford and Stockport areas will explore new ways of using the checks. HMRC will evaluate new risk processes and ensure new approaches are cost-effective and fit with its wider compliance activity.

HMRC will also work with tax agents to review the benchmarks of what good record keeping should be. They recognise that many tax agents do much to improve their clients' record keeping and HMRC wants to work with them to improve standards.

For taxpayers outside the development areas HMRC will continue with existing BRCs until they are completed.

If you are a business owner in the Cheltenham and Bristol area looking for professional accounting and business advisory services, contact Mitchells for professional advice on strategies to take your business forward.