HMRC Business Records Checks

Business record checks (BRC) are checks carried out by HM Revenue & Customs (HMRC) into your bookkeeping records. The scheme was originally piloted between April 2011 and the 17th February 2012 when about 3,500 business checks were carried out. Since the suspension of BRC checks in February 2012, HMRC felt the scheme was effective but there was not wide enough availability of education. The checks have been redesigned and will roll out on a regional base between late November 2012 and February 2013.

The following guide will help you understand:

  • Business Record Checks
  • What to expect if you are contacted by HM Revenue and Customs
  • What records to keep
  • How to prepare if contacted by HMRC

What are business record checks, who is most likely to be checked, what to expect if contacted and likely BRC penalties

The new business record checks will consist of a letter being sent to arrange a short telephone questionnaire.

Companies who are most likely to be contacted are companies who usually submit their accounts with errors in, however any company can be contacted so don’t worry if you are contacted.

Following the telephone questionnaire interview if some issues have been identified, self-education 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 face to face meeting for up to two hours will be arranged to go through your bookkeeping records. If the outcome of the meeting 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 no penalty will be issued, however if they have not been met a penalty of £500 is likely for first time offences. If your business is in its first year of trading a penalty of £250 will be issued.

Penalties of up to £3,000 can be issued if the visiting officer finds that the business records have been deliberately destroyed or this could be reduced to £1,500 if they are partially destroyed.

What records do I need to keep?

As a Limited company HMRC would expect you to keep certain records to back up claims in your bookkeeping.  For example:

  • All evidence of all income, such as the invoices you raise a client for your work.
  • Proof of purchases and expenses, for example receipts for goods you have purchased, only final receipts will be accepted, delivery notes are not acceptable.
  • Company bank statements, your monthly statement will need to be filed.
  • Company credit card statements similarly to your bank statement a copy of this will need filing.
  • Mileage records, this could just be an excel workbook or piece of paper you use to keep track of mileage, but whatever you use, a copy of this will need to be filed.
  • Contracts for supply of services, a copy of your contract with all end clients’ and recruitment agencies needs to be kept (if you have any).
  • Statements of dividends, our handy dividend voucher can help you with this, but all records of dividends taken from the company need to be recorded.
  • Any private money brought into the business. This could be as simple as a piece of paper saying how much you lent the company. Ideally proof would be a bank transfer or cheque stub showing money has been given to the company.
  • Any prior year information – copies of filed company accounts, tax returns, VAT returns.

These are just a few examples of some of the records you could keep. In reality you need proof of everything you company does, whether it’s buying stationary, taking your monthly pension or paying your flat rate VAT. Everything has to be documented and proof of that event happening needs to be kept. There is no denying you may end up with a pretty hefty pile of paperwork by the end of the year, but if you keep it all you should have little to fear if you were to have a business record check.

These records need to be kept for a minimum of six years; however it is usually advised to keep them for 7 or 8 years.

As an SJD client, your dedicated tax expert who will advise you and help ensure you keep the correct records. In addition to the on going support you will receive, SJD also will supply you with:

  • A bookkeeping spreadsheet – In a nutshell this will help to organise your company so that you can clearly see what records you need to be keeping each month.
  • Invoice template – To help you raise invoices to your client for the work you have carried out.
  • Dividend vouchers – To record when you have taken dividend payments from your company.
  • Business bank account – SJD Accountancy has a partnership with Metro Bank. In addition to this it gives you the option to have a copy of your bank statement sent automatically to your SJD contractor tax expert so there is no need for you to send a copy.
  • Year end accounts – SJD can prepare your year end accounts*, which is one of the key records which you need to keep, this is because they are a legal requirement set out by the HMRC. SJD Accountancy will most likely submit abbreviated accounts, so a copy of these will need to be kept too.

Business records should be something you do without thought as a director of a Limited company, however it is always recommended you speak to an accountant to make sure you have kept the correct records.

How to prepare if contacted by HMRC

  • Ensure your bookkeeping is up to date.
  • Check your business records are organised and everything is there.
  • If your using accounting software make sure all the records are acccuate and up to date.
  • Seek advice from your accountant, even if it is just for reassurance you have everything you need.

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If you have any questions about contracting or would like any further advice please call our new business team on 01442 275789 or email newbusiness@sjdaccountancy.com.