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After a pause from 3 February 2012 to 31 October 2012 for HM Revenue & Customs ‘HMRC’ to review recommendations it has today started the Business Records Checks ‘BRC’ again.

For those who have not heard about this before or forgotten this is what the HMRC website has to say:

Fresh approach to Business Records Checks

Businesses need to keep adequate business records so that they can complete their tax returns correctly.

A pilot programme of Business Records Checks (BRC) began in April 2011. This involved checks by HMRC on the adequacy of Small and Medium-sized Enterprises’ (SMEs) statutory business records. SMEs are businesses with an annual turnover below £30 million who employ less than 250 people.

Up until 17 February 2012, 3,431 BRC had been carried out. These found that 36 per cent of businesses had some issue with their record-keeping of which 10 per cent had issues serious enough to warrant a follow up visit.

Following a review, HMRC announced a fresh approach to its pilot BRC programme on 3 February 2012.

The review of the pilot programme, which included discussions with trade and professional bodies’ representatives, found clear evidence that the programme was effective in improving record-keeping practices amongst SMEs. However, it recommended that the checks were better targeted in future, and linked to wider education and support activities.

In order to implement the review’s recommendations all new BRC activity was paused from 3 February to 31 October 2012 to allow HMRC to redesign the BRC process.

Read the full report of the Business Records Checks Review (PDF 145K)

Overview of new approach to BRC

A new approach to BRC started on 1 November 2012. Customers who are more likely to be at risk of having inadequate records will be 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 customers that no further action is required. Where some issues are identified, customers will be offered targeted self-help education options. Customers who are assessed as being at risk of keeping inadequate records will be referred for a BRC visit.

Useful Information

Business Records Checks

 

So how has the process changed? Simply put HMRC will now:

• Write to those Small and Medium sized Enterprises ‘SMEs’ selected for a BRC.
• Telephone the selected SMEs to talk through their business record keeping. The call is expected to last 10 – 15 minutes.

Based on the responses received, HMRC will then:

• Assess whether a face to face BRC visit is required.
• If the business records are deemed to be adequate, the HMRC officer making the call will tell the SME and then confirm the decision in writing.
• If the business records are deemed to require improvement, an HMRC officer from the Business Education and Support Team will make contact with the SME.
• If the business records are deemed to be inadequate and a visit required, the HMRC officer will ask one of their colleagues on the booking team to call to make the arrangements.

This appears to be very similar to the traffic light system used by HMRC prior to the suspension. Adequate records were given the green light, records in need of improvement were given the amber light and inadequate records awarded a red light.