THE TAXMAN has postponed any further record checks of small businesses, as it looks to introduce a more targeted approach in the future.
The pilot scheme to check the record-keeping practices of SMEs, which caused such controversy, has been put on hold as the consultation process suggested that education should be paramount to improving record-keeping.
Nearly 2,500 businesses' records have been checked by HMRC since the pilot scheme's launch in April 2011.
Some 28% visitors had some issue with their book-keeping, while an additional 11% had issues "serious enough to warrant a follow-up visit".
HMRC's review of its pilot found deep concerns among advisors, particularly among the speed of the introduction of the scheme, and its scope.
"Although it was a public consultation the scope of the consultation was about ‘how best to implement a programme of BRC with penalties for significant record-keeping failures', not about whether BRCs were the best way to proceed," stated the report.
"This came as something of a surprise to the forums who regularly meet with HMRC who felt they could, and possibly should, have been consulted on the proposal long before it got to the public consultation stage. The view has been expressed that BRC may have been much more widely accepted if there had been a longer lead-in time and agents had time to get their clients prepared."
HMRC's director of local compliance, Richard Summersgill, said: "Four out of 10 businesses had an issue with their business records, and of those that required a follow-up visit, we found that 90% subsequently improved their record-keeping."
However, after reviewing the pilot programme and listening to the views of businesses and representative bodies, Summersgill said HMRC acknowledges the need for a fresh approach to business records checks.
"The BRC visits provide benefits for the business and HMRC," he said. "We want businesses to pay the right amount of tax at the right time, avoiding potential interest and penalties. The checks also give greater assurance to HMRC when the business submits its tax returns."
Visits will only take place where they have already been booked, or where seriously inadequate records were intitially found.
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