ABBEY TAX PROTECTION REPORT THAT 50,000 BUSINESS RECORDS CHECKS TO BE CONDUCTED ANNUALLY FOR THE NEXT 4 YEARS (January 2011)
HMRC published a Consultation Paper on 17th December announcing that they intend to start a programme of Business Records Checks (BRCs) that will review both the adequacy and accuracy of business records within the SME sector. The timing of the Consultation is not ideal with a closing date for comments of 28th February 2011 but this is something that could potentially affect almost every client and so does require consideration.
As ever with HMRC Consultations, the die appears to be already cast: the programme of checks will happen starting in the second half of this year with HMRC projecting 50,000 reviews annually for the next 4 years. The Consultation is merely concerned with how to implement the programme.
Additionally, the BRC programme will be accompanied by a tariff-based penalty regime for failure to keep proper records. As practitioners will know, the maximum penalty for failure to maintain business records currently stands (and will remain) at £3,000, but the imposition of any penalty - let alone the maximum - has historically been quite rare. HMRC have said that they do not intend to have a regime which simply levies £3,000 every time there is a failure to keep proper records. The implication is that some level of penalty will be charged, the question is merely how much.
Furthermore, HMRC state in their impact assessment that this initiative will bring in £600million over the four years. Are we the only cynics who have worked out that 4 x 50,000 x £3,000 comes to ... wait for it… £600million?!?
We will continue to update our clients during the consultation process and thereafter because, of course, the BRC is only Step 1 for clients with Step 2 potentially being an intervention based on the conclusion of the BRC. Clearly, as well, we will be giving guidance as to how our fee protection insurance will respond to BRCs and subsequent interventions.
For further information contact Abbey Tax Protection
Tel: 0845 223 2727
Email: sales@abbeytax.co.uk
Web: www.abbeytax.co.uk
COMMENT FROM NTEGRITY PROFESSIONAL INDEMNITY
When HMRC conduct these record checks many small business owners will undoubtedly look to their accountants for guidance and support. In the event of penalties being imposed some are bound to blame their accountant for not pointing out that the records kept are inadequate or misleading and professional indemnity claims against the profession therefore look set to increase. Once the effect of this is felt by Insurers expect the professional indemnity insurance market to toughen and premiums to rise.
For further information contact NTEGRITY Professional Indemnity
Tel: 0845 638 3273
Email: enquiries@ntegrity.co.uk
Web: www.ntegrity.co.uk