HMRC’s business records checks programme is running at its highest level since it began in 2011 with the number of checks increasing by 60%, research by tax investigations insurance firm PfP has shown.

The Revenue has increased the number of checks on business records from 3,431 in 2011/12 to 5,515 in 2013/14, despite intentions to scale back the size of the programme.

The programme was initiated to identify businesses with poorly kept records, which could lead to underpayment of tax. Businesses found with inaccurate or out-of-date books can be fined up to £3,000 on top of any unpaid tax, interest and penalties.

The programme was put on hold following a review in 2012 due to criticism from accountancy firms and business groups but was recommenced in November of the same year.

An HMRC spokesperson said the revised process intended to filter our “low-risk” businesses.

They said:

“This did not, however, prove as effective as hoped.”

The PfP research found that the number of checks that showed “nothing significantly wrong” with business records had increased after the review from 64% to 73%. This, they said, could prove to be a “potential problem” for small businesses that could face visits.

Kevin Igoe, PfP managing director said:

“After the review HMRC said it would try to reduce the burden on compliant businesses by using a more targeted approach. However, the majority of those being reviewed are finding that their business records are sufficient.”

HMRC says it is focussing its efforts on higher yielding activity and a more strategic approach to business checks.

Photo by HMRC