Limited company contractors pleased as business record checks are abolished
Many small businesses will be sighing with relief this week as HM Revenue and Customs have announced that they will no longer be conducting Business Record Checks. BRCs were a compliance procedure which were designed to ensure that businesses were collecting and keeping enough information about their income and outgoings to enable them to complete their tax return properly.
The tests involved an initial phone call between business owners and HMRC during which the taxman would assess whether or not proper records were being kept for the business. The results of the phone call would either be a letter confirming that no further action was necessary, an offer of support to ensure that the business had everything they need to keep effective records or a follow up visit for those business who were thought to be failing to maintain adequate records. Those falling into the latter category then they could be subject to penalties of up to £500.
By 2013, nearly 30,000 businesses had been involved in the BRC programme, and not one was found to be keeping records to a standard low enough to trigger a fine, with many commentators believing that this demonstrated a fundamental ineffectiveness of the system. Many experts believe that the BRCs were poorly-targeted, including Andy Gotch of the Chartered Institute of Taxation’s Owner Managed Business Sub-Committee. He believes that scrapping the BRCs shows a degree of common sense whilst acknowledging the failure of the checks to achieve the desired result.
Although the BRCs were supposed to be conducted on businesses which were considered to be at high risk of keeping inadequate records, most were found to be managing their financial data effectively. The decision to stop carrying out BRCs is not indicative of any plans to ease up on small businesses when it comes to tax compliance, but for businesses which are already maintaining ample records, the removal of another layer of admin will be warmly welcomed.
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