HM REVENUE & CUSTOMS’ decision to scrap its controversial Business Records Checks has been roundly welcomed by the CIoT.
The checks are a compliance procedure HMRC use to confirm a business is keeping sufficient information on its income and expenses to produce an accurate tax return. They have consistently been criticised for being ineffective and poorly targeted.
For businesses with inaccurate records there is a potential £3,000 fine on top of any unpaid tax, interest and penalties.
In February 2012, the record checking programme was put on hold and sent for review after it received criticism from accountancy firms and business groups, but after a seven-month break the checks began again in November 2012. But HMRC has now scrapped the practice.
Chairman of the CIoT’s owner-managed business sub-committee Andrew Gotch described the move as “a victory for common sense”.
He added: “Tax advisers are strongly supportive of efforts to improve record keeping by business but, as HMRC themselves acknowledge, this 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.
He did, however, warn that scrapping Business Record Checks “does not mean HMRC are going to get laxer on tax compliance by small business”.
“It remains crucial for businesses of all sizes to keep records up to date and in good order,” he said “This is likely to become even more important as HMRC bring in digital tax accounts, which may require businesses to submit data more frequently.”
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