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Newsletter issue - November 2015.
HMRC have announced that they have scrapped their compliance procedure known as 'business record checks' (BRCs) with immediate effect. However, businesses should be warned that keeping good records is still essential to enable them to produce accurate accounts and tax returns.
Broadly, BRCs were introduced in 2011 and used by HMRC to confirm that a business was keeping sufficient information on its income and expenses to produce an accurate tax return. The checks have, however, consistently been criticised for being ineffective and poorly targeted.
HMRC have acknowledged that the initiative has not proved a cost-effective way of achieving the desired result. Despite efforts by HMRC to identify businesses at 'high risk' of having inadequate records, most of those they called on were found to be keeping records to an acceptable standard. The evidence is that records are being kept to an appropriate standard by most small businesses in the UK.
It remains crucial for businesses of all sizes to keep records up to date and in good order. This is likely to become even more important as HMRC bring in digital tax accounts, which may require businesses to submit data more frequently.
