Business owners dread the idea of HMRC to conduct a tax audit.
Luckily, the HMRC compliance standards are not as
challenging as you think. In fact, with a little bit of preparation,
professional assistance, and a touch of luck can ensure smooth operational
activities for your business without the fear of a tax audit.
Naturally, you don’t want to complicate things with IR35 and trigger an audit from HMRC. Besides,
you want to ensure the management of your resources in the most sophisticated
manner possible.
Though there’s always a chance of audit looming over your business,
you can implement numerous cautious strategies to protect your business from a
tax investigation:
Analyze
Your Tax Returns
As much as hiring a professional tax accountant matters, it wouldn’t
give your business immunity from a possible tax audit. Your business, after
all, is solely responsible for all the tax forms your accountant submits on
your behalf. Therefore, check your tax return repeatedly before your accountant
finalizes submission.
Don’t
Hesitate or Wait for Explanations
It is vital to take into account that HMRC utilizes software to
pinpoint flaws in your profit and expense accounts. You can, of course, explain
certain anomalies in your tax return to HMRC to thwart suspicions and prevent a
possible tax investigation.
Make
Sure to Submit Correct RTI
One of the most effective ways to avoid a tax audit is to make sure
your RTI (real-time) submissions align with payroll providers to decrease your
chances of a tax investigation. Concurrently, make sure you answer all of the
concerns regarding tax return to HMRC without bias or prejudice. The idea is to
give the impression that you’ve got nothing to hide from the taxman.
Ensure
the Authenticity of Your Expenses and Other Business Costs
You should be aware of the fact that HMRC analyzes taxpayers’
profiles based on their current and previous financial performance. In fact,
HMRC uses different kinds of ratios based on your tax returns. Thus, don’t try
to deviate or manipulate your expenses or other business costs that might put
you in a position of explanation.
Tip-Offs:
Don’t Disclose Information
Business owners tend to discuss internal business matters to
external parties that might lead to tip-offs. It could be from your partner,
ex-spouse, or business associate. And that’s precisely why you should be
careful about disclosing internal affairs of your business to third-parties
that may disclose the Information.
Keep
an Eye on HMRC’s Compliance Policies
Sure, there’s no specificity about the criteria with which HMRC
evaluates the financial position of businesses. It could be just the behavior
of a business owner that might result in a tax audit. So long as you monitor
the current compliance policies and regulations of HMRC, you can minimize the
chances of audit from the taxman.
Hire
an Experienced Accountant
Businesses shouldn’t forget the fact that HMRC has an extensive
database directory of your tax records. It means they can put two and two
together and recognize any inconsistencies in your business.
An accountant, for instance, will make sure that you submit tax returns without mistakes and on time. And little to no chance of errors means there’ll be no one at HMRC to raise tax suspicions. In hindsight, an accountant can handle your financial books more professionally and reduce the risk of tax audit altogether.
We can help with all of your business and personal tax and financial planning needs. For a strategic review of your finances, please contact us.
Disclaimer: We don’t take any responsibility for actions taken based on above information. Please speak to our financial advisor if you need more information. This guide was written specifically for Smart Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a business managed by Smart Accounting. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details are correct at time of writing.
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