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Monday, 03 September 2018 14:15

How To Avoid A Tax Inspection

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Whilst HMRC does not openly publish the amount of tax investigations it launches every year, at YBC we have seen an increase in the numbers of members being contacted by them to have a look at their numbers.

Like most things in life, prevention is better than cure, so, here is a list of some of the main reasons you might get that dreaded brown envelope landing on your door mat.

Repeatedly Late Reporting

If you are always late in submitting VAT returns or payroll reporting, this will raise their suspicions!

Not Registering For VAT & Maintaining Turnover At Just Under The Threshold

Every business owner wants to grow their business.  Hitting the VAT registration threshold, if not prepared, can have a major effect on a business.  If your business sees a couple years of growth then suddenly stops just below the VAT threshold, HMRC may think you have opened up a second business, to split sales, or might not be declaring sales.

Big Variances In Figures – Turnover, VAT, etc

Could just be the way you trade (but that might be attributed to sector variances) however, it is a red flag if there is no pattern to the way your sales, taxes and profit are reported.

HMRC Tip Off

Whether it is a competitor, ex employee or disgruntled customer, HMRC does act on tip offs.

You Do Not Have An Accountant

Unless you are an accountant or book keeper, you are more likely to make mistakes if you do not have anyone looking after your books.

Forgetting To Declare Income

Don’t forget that in all cases, transactions are at least two sided and a third party is paying money to or receiving from you.  If they declare something that does not tally with you, HMRC's alarm bells start ringing!

Just A Random Thing

Whilst they possibly do not draw your name out of a hat, HMRC does look at particular sectors in detail and they will also randomly select businesses to review.

 

With the length of investigations ranging from several months to a few years, how would you cope if HMRC came knocking?

Most businesses, quite rightly, would pass things over to their accountant, but many do not realise that they have to bear the costs, even if HMRC do not find anything, which could be several thousand pounds!  This is why YBC brings peace of mind to thousands of business owners across the UK who know they are covered by our financial protection policy, designed just for issues like this.

With protection starting at just £149, click here for more information and to join.

 

 

Paul Kelly

Co-founder of Your Business Community, Paul has been running his own small businesses since 2001, after leaving his job as Product & Marketing Director of Bush Radio plc.

With great experience in setting up and running several businesses, as well as helping entrepreneurs at all stages of their development, Paul is a great supporter of SME's.