The number of small and medium-sized enterprises (SMEs) facing detailed checks by HM Revenue & Customs (HMRC) has risen by a third after checks were reintroduced in November 2012, according to a recent study.
The Business Record Checks (BRC) programme was initiated to identify businesses with poorly kept records, which might lead to the underpayment of tax. For businesses with inaccurate records there is a potential £3,000 fine on top of any unpaid tax, interest and penalties.
In February 2012 the BRC programme was put on hold and sent for review after it received criticism from business groups, but the checks began again in November 2012. Although HMRC has scrapped its more ambitious plans to visit 50,000 businesses a year, the number of onsite inspections taking place is still increasing.
The outcome of the review was to attempt a more targeted approach for the checks because it showed that most businesses kept appropriate records. Despite this, just over 5,500 small firms underwent the checks in the year to April 2014, up from 3,431 in the ten months between April 2011 and February 2012.
However, small firms are obviously getting better at record-keeping, as 73 per cent of the companies investigated during the period were found to have no significant errors or anomalies in their paperwork, up from 64 per cent in the previous year.
A spokesman for the firm that compiled the figures said that these business checks are a worry for small business owners because they don’t have the time to sit with the taxman as he undertakes them.
Unfortunately, however, the number of checks is unlikely to decrease because HMRC’s earnings from BRCs were forecast to increase each year, according to the review, rising from £13m in 2012/13 to £49m in 2013/14.