30th December 2011

Hope for contractors as HMRC rethinks records check scheme

HMRC has confirmed that it will review its controversial small business records check scheme.

This will be good news to freelancers and contractors, many of who are worried that they will be investigated by HMRC. The government body is spot-checking that businesses have kept good records of contractor pay and outgoings and that the correct amount of contractor tax has been paid.

Under the Business Records Checks (BRC) scheme, HMRC is investigating small businesses and checking records to see that they are accurate and up to date. They can fine businesses up to £3,000 for record-keeping that is deemed not to be good enough. However, officers have tried to reassure contractors that fines will be fair.

A statement said, “HMRC would like to take this opportunity to reassure taxpayers and agents that HMRC will not (except in extreme cases such as where a taxpayer has no records or has destroyed them) be seeking to use the record-keeping penalty provision during the pilots.”

Many have criticised the BRC scheme, saying it has been rushed, badly planned and poorly executed. In addition it has been argued that at a time of economic strain, such pressures do not help small businesses and that the fines are unfair when news reports suggest big businesses are being let off large tax bills.

HMRC has said that a strategic review of the BRC will take place and that professional bodies will be consulted. However, for now the checks will continue and findings will be fed back into the review.