WOULD YOU BE FINED £3,000 BY HMRC?

HMRC published a Consultation Paper on 17 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 28 February 2011. This is something that could potentially affect all SME’s 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.  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 you during the consultation process and thereafter because, of course, the BRC is only Step 1 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.

If you would like further information about this, please contact us at experts@meadesandco.co.uk