Following sharp criticism from leading professional bodies, HMRC has acted to adopt a more conciliatory and positive approach to business records checks (BRC) with small- and medium-sized companies.

While jobbing Umbrella Company Employees have little problem with the Revenue ensuring that businesses keep proper tax records and pay due sums accordingly, they also have little interest in seeing SMEs heavily penalised for what amount to genuine mistakes. Not only do SMEs provide the contracting community with a steady supply of assignments but also many Umbrella Companies are themselves SMEs.

After complaints that tax officials had been far too heavy-handed over genuine mistakes – criticism that actually caused HMRC to suspend the checks and review the programme – the Revenue has switched emphasis towards educating rather than penalising. The review revealed that SMEs with inadequate records on first inspection had all vastly improved by the time of follow-up visits. No penalties had been necessary, which was the issue that had prompted the sharpest criticisms.

BRC programmes in five UK areas – Bradford, Leeds, Stockport, Edinburgh and Glasgow – will aim to target at-risk SMEs with new actuarial techniques. These businesses will receive active guidance on how to improve any inadequacies in their record keeping.

The Association of Taxation Technicians (ATT) had been amongst the more vocal of the critics of the Revenue’s earlier handling of BRCs. Its president, Yvette Nunn, said that the ATT had been sceptical about Revenue claims at the start of the programme in 2011 that 40% of SMEs had inadequate records, seeing it instead as “a thinly disguised attempt to raise revenue”. Ms Nunn praised the Revenue, however, for responding positively to criticisms and refining its approach.

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