Serious questions remain over Business Record Checks

FUNDAMENTAL QUESTIONS still remain over the taxman's strategy to proceed with business record checks on smaller businesses.

Despite HM Revenue & Customs' announcement yesterday that next year it would only look at the accounting records of 20,000 businesses, as opposed to the 50,000 it had originally mooted, a lack of detail about its plans have left advisors concerned.

CIoT president Anthony Thomas said the legal basis by which HMRC could apply penalties prior to a tax return being submitted was still unanswered.

Clarity is required over the criteria by which HMRC will adjudge records' accuracy or incompleteness.

Another big concern is that the scheme is being rolled out without a thorough analysis of the pilot. "That is not the way to build a good relationship with tax advisers," Thomas added.

"At what point will HMRC decide a significant failure has been committed ? At what point will a fine be levied ? Will a fine be levied for a first failure, or will SMEs be given a chance to make improvements," said Abbey Tax Protection senior tax consultant Guy Smith.The taxman announced that the number of officers working on the checks would leap from 30 to 120.

But with 20,000 business' records to check, many feel that the officers simply won't have time to do any justice in the sense of properly understanding the businesses they have enquired into.

In a working year of 220 days, advisors suggest that officers working in pairs would have a mere hour and a half per business. "They could only scratch the surface," said Baker Tilly head of tax George Bull.

Even scratching the surface is too much for some. Or as PKF tax partner John Cassidy puts it: "They're a waste of everybody's time."

But HMRC is forging ahead, albeit at a more modest level. For the taxman, good record-keeping aids accurate tax returns.