Is Your Business Prepared For Business Record Checks?

HMRC has announced that its campaign to check businesses are keeping the right records is being relaunched. Small businesses will need to ensure that they are maintaining adequate business records to support the information in their tax computations.

Business record checks (BRC) are checks carried out by HM Revenue & Customs (HRMC) into businesses’ bookkeeping records. Businesses are required by HMRC to keep adequate business records so that they can complete their tax returns correctly. A pilot programme of Business Records Checks which began in April 2011 involved Small and Medium-sized Enterprises' (SMEs). SMEs are businesses with an annual turnover below £30 million who employ less than 250 people.

Around 3,431 checks were carried out up to 17 February 2012 as part of the pilot. It found 36 per cent of businesses had issues surrounding record keeping, of which 10 per cent had serious enough issues to warrant a follow up visit from HMRC. The pilot was suspended from the 3 February until the 31 October 2012 to allow HMRC to redesign the process. Since then the checks have been redesigned and were rolled out on a regional base between late November 2012 and February 2013.

Any SMEs can be contacted by HMRC, but those most likely to be contacted are companies who usually submit their accounts with errors in them. Following the initial telephone interview, if some issues have been identified, self-education literature on what records need to be kept will be offered by HMRC, however if more serious areas are identified HMRC will proceed with a full business record check.

If you are referred for a business record check, a visit from HMRC for up to two hours will be arranged to go through your bookkeeping records. If the outcome of the visit is that you have fallen short of what is required you will be given the help and support to make the required improvements by a certain date, usually three months later. As long as the requirements have been met by that date, no penalty will be issued, however if they have not been met a penalty of £500 will likely be issued for first time offences. Penalties of up to £3,000 can be issued if the visiting officer finds that the business records have been deliberately destroyed.

As a Limited company, you would be expected by HMRC to keep certain records to match your bookkeeping. These records need to be kept for a minimum of six years, the following of which are some examples:

1.   All evidence of all income - e.g. invoices from clients

2.   Proof of purchases and expenses

3.   Monthly file company bank statements

4.   Company credit card statements 

5.   Mileage records

6.   Contracts for supply of services

7.   Statements of dividends - e.g. dividend vouchers

8.   Any private money brought into the business.

9.   Any prior year information – e.g. tax returns and VAT returns.

In fact, everything your company does has to be documented and all proof of that event happening needs to be kept. In this way, you should have little to fear if you were contacted for a business record check.

Belsize accountancy specialise in working with contractors and SME businesses and can assist you in setting up systems to maintain accurate business records. This will provide you with better information to manage your business together with the additional comfort that your records will satisfy the HMRC should you be selected for a business record check (BRC). For more information feel free to contact us on 0207 0430 052 or info@belsizeaccountancy.co.uk.