CIOT raise concerns over premature business records checks

Friday, 8 April 2011 12:00 AM

News that HM Revenue & Customs (HMRC) had started their enhanced Business Records Checks (BRC) programme early dismayed the Chartered Institute of Taxation (CIOT), and the Institute raised its concerns at a meeting with the Revenue today.

At the meeting HMRC told CIOT Deputy President Anthony Thomas that this is a 'test and learn' pilot running until July and no penalties will be charged unless there is evidence of deliberate loss or destruction or complete absence of business records. As a result of the meeting HMRC have agreed to amend their letter to targeted businesses to clarify the basis of the trial. Although HMRC had mooted the idea of a trial, the extent and timing of this had not been communicated to advisers and taxpayers - especially the unrepresented - who have understandably been concerned by the recent developments.

Anthony Thomas, CIOT Deputy President, said:

"HMRC's reassurance that this is a 'test and learn' pilot where no penalties will be levelled, other than in exceptional circumstances, is welcome. However they should have made this clear to tax advisers, business organisations and, above all, those taxpayers - represented and unrepresented - they are targeting, from the outset.

"By not doing this HMRC gave the strong impression that they were proceeding with this project prematurely and without listening to consultees."

The CIOT participated in the recent BRC consultation and expressed deep concern over how the programme will be carried out, how it will be advertised and the legal basis of applying penalties before a tax return has been submitted. Representations were made over the need for HMRC to apply the right standards in their testing; the need to train their own staff properly; the importance of making sure that businesses are aware of what HMRC expect; and only levying penalties for serious breaches.

HMRC are expected to publish in the next fortnight their response to submissions to the consultation, which the consultation paper envisaged would be published within a month of the deadline, which was extended to mid March.

Anthony Thomas explained:

"The CIOT is strongly supportive of efforts to improve record keeping by business, but this is the wrong way of going about it. A good programme to improve business record keeping would involve HMRC and tax advisers working together to educate business about good practice and support them in improving their systems. In addition both HMRC and advisers could work together to warn about the risks of poor record-keeping. What HMRC are proposing appeared to be a blunt instrument. However, we are hopeful that they will now work with the professional bodies over the coming months on this project.

"We need to be sure HMRC staff will not be expecting the smallest businesses to have perfect records written up every day: that is simply not appropriate. What counts as adequate records needs to have regard to the sort of business. Additionally HMRC need to ensure they have properly briefed and trained their staff and have the legal backing for the work."

Notes to Editors

1. HMRC's consultation paper on business record checks can be found at http://tinyurl.com/brccondoc
The CIOT's response to the consultation can be found at http://www.tax.org.uk/media_centre/LatestNews-migrated/BusinessRecordChecks

2. The Chartered Institute of Taxation (CIOT) is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT's primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it - taxpayers, advisers and the authorities.

The CIOT's comments and recommendations on tax issues are made solely in order to achieve its primary purpose: it is politically neutral in its work. The CIOT will seek to draw on its members' experience in private practice, government, commerce and industry and academia to argue and explain how public policy objectives (to the extent that these are clearly stated or can be discerned) can most effectively be achieved.

The CIOT's 15,400 members have the practising title of 'Chartered Tax Adviser' and the designatory letters 'CTA'.

- ENDS -

George Crozier
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