HMRC has suspended its business records check programme and will target future inspections on sectors with a higher risk of keeping inadequate tax records.
The move is the result of an internal review into the checks which were criticised by the Federation of Small Business last month as evidence the Government is failing to cut red tape for small businesses.
In a pilot run of checks on 2,437 businesses, 28 per cent were found to have a problem with their record keeping and an additional 11 per cent had problems serious enough to require a follow up visit.
HMRC director of local compliance Richard Summersgill says: “Four out of ten businesses had an issue with their business records, and of those that required a follow-up visit, we found that some 90 per cent subsequently improved their record-keeping.
“However, after reviewing the pilot programme and listening to the views of businesses and representative bodies, we acknowledge the need for a fresh approach to business records checks.”
HMRC will now only carry out business record checks which are already booked. The new approach will begin in April and will include businesses being signposted to education and support for record keeping.
Last month, FSB chairman John Walker warned HMRC’s plans to inspect tax returns of up to 20,000 small firms undermined a pledge made by the Government to reduce the regulatory burden on small businesses.