Business Records Checks: What you need to know
HMRC started a ‘new approach to Business Records Checks’ (BRCs). The target audience of these checks are small and medium sized businesses.
In the context of income tax, a BRC is a check by HMRC that the records of a business are adequate to allow a tax payer to submit an accurate income tax return. What is new is a check on records which will be used to prepare a tax return rather than HMRC checking a tax return that has already been submitted.
What are adequate records?
This is one of the difficulties. Unfortunately there is no precise answer to this question. For a trading business, the following would be regarded as adequate records; A record of all sales and takings, including cash receipts. For example till rolls, sales invoices, bank statements, and paying-in slips.
A record of all purchases and expenses, including cash purchases. For example purchase invoices, receipts, bank and credit card statements, and cheque book stubs.
Why might a business be selected?
HMRC select a number of businesses based on their view which are more likely to be at risk of having inadequate records. The criteria for HMRC’s computer driven risk analysis is not known but, for example, a business with a lot of cash transactions is likely to be seen as higher risk.
What is involved in a BRC?
After the selection process the following may happen; HMRC will contact the business, initially by letter, advising that the business has been selected for a BRC and HMRC will get in touch, normally by phone, within a few days.
In the phone call, HMRC will ask approximately 15 questions about the business records to help them determine the adequacy of the records. If HMRC decide you are at risk of keeping inadequate records they will state that you need a face to face visit.
What action should you take?
If you do receive a letter, we would recommend that you contact us as soon as possible. We can then advise you as to the best course of action.
Please do not take the prospect of these checks light. If HMRC consider that the records are inadequate and no changes are made, HMRC may apply a records keeping penalty (usually £500).
If you require any assistance, please contact us:
30 Rathfriland Road,
Co Down BT34 1JZ
Tel. 028 302 69933
Fax 028 302 69944
Would you like to advertise your business on Newry Times and reach thousands of people every day? Contact the Newry Times office on 028 4062 6520 or email Paul: email@example.com