HMRC Tax Investigation – Are You Ready?by Benny Gala DNS Accountants
Are you self employed? Submitting your tax return to HMRC once in a year is your responsibility. You must provide all the details of your income along with the profit you made in the business. The tax investigation by HMRC for businesses seems a nightmare for most of the small business owners. The entire process is stressful, time-consuming, and in some cases, you could end up with a tax bill. No one is willing to get investigated and pay more taxes than they actually should be paying.
There could be several reasons that can easily attract HMRC towards your self-employed business:
- Your tax returns show unprofitability for a couple of years
- Submitting conspicuously improper figures on the tax return
- Someone informs HMRC about unusual activities in your accounts
- You often file tax returns on late
- Your accounts are not matching with industry norms
- As per your report company directors are earning less than the employees
For self-employed tax investigation, HMRC may check a broad range of records and your business documents –
- HMRC could check the information on the taxes that you’ve paid
- Your account books and details of the tax calculations that you’ve made
- HMRC could check your self-assessment return if you’re a sole trader.
- Your PAYE records
There could be 2 different situations after the investigation made by HMRC. They could find something wrong in your return, but don’t believe that you have acted with negligence or dishonestly. In such a case, you’ll be given 30 days to rectify those errors in your return. On the other hand, if HMRC thinks you’ve acted with negligence or dishonestly you’ll be given penalties, extra tax, and interest.
How to avoid the stress of self-employed tax investigation by HMRC?
The below steps you can follow to keep yourself free from any difficulties:
1. Always keep your accounts books up to date –
• Your bank account should always match with the balance shown in your accounting software
• You must keep copies of the invoices for all the transactions you made
• You should keep copies of the receipts of all your business-related expenses
2. Avoid mistakes in your accounting data. It’s always better to consult an expert accountant
3. Always file your self-assessment and VAT returns on time
Created on Sep 24th 2020 04:55. Viewed 183 times.