HMRC tax investigations and audits of your business and personal accounts can be stressful and time-consuming. You’d want the officials to scrutinize your books after working hard and spending a lot of time establishing your business. It can also cost you a significant amount of money in accounting fees.
Even though you cannot eliminate the possibility of an HMRC tax investigation, there are specific steps you can take to minimize the occurrence of such a situation. The first step you need to take is to hire a chartered tax adviser and accountant that can help you streamline your financial operations and ensure that you’re not the subject of a rigorous tax investigation.
It would be best to be mindful of why your personal or business accounts might come under scrutiny. Here are some reasons why HMRC might audit your business and personal accounts.
A Tip-Off
If your business has some dodgy tax practices, then a whistleblower can give an anonymous tip-off to the HMRC that can lead to an investigation. Of course, anyone can be a whistleblower. They can be disgruntled employees or business partners aware of such dodgy practices. If you operate on a cash-only policy, you’re more likely to be investigated by the tax authorities.
Tax Return Mistakes
A one-off mistake on your tax return is likely to be ignored by HMRC. The officials understand that filing a return can be quite cumbersome, and not everyone is an expert in taxes. However, if you regularly make mistakes on your returns by submitting inaccurate figures or incorrect information, the HMRC is likely to get suspicious.
Routine mistakes will force HMRC to ponder whether these errors are made deliberately or not. However, even if you haven’t done them deliberately, you can still be subject to an investigation due to regular errors on your tax returns. Therefore, it is important to hire the services of chartered tax advisers & accountants to help you file your tax returns accurately.
Unprofitability
Years of unprofitability can trigger tax authorities to investigate your business. Unprofitability is sustainable, especially if you have a lot of investment backup. However, HMRC might not think it that way and would want to investigate if you’re submitting a tax return showing unprofitability year after year. If you hope to avoid such a rigorous investigation, hire a tax adviser who can advocate for your business and clearly explain the reasons for consistent unprofitability.
Fluctuating Numbers
HMRC will only investigate a business if they find something ordinary. If you have consistent figures, then there is no cause for concern. However, if your number fluctuates drastically, then HMRC will notice. For example, if you made a £500k profit in one year, and the following year it dramatically fell to £100k, your business will get noticed.
There may be a reasonable explanation for such a drop, and hiring an expert tax adviser will help you relay the reasons for such an occurrence. Provide timely information to HMRC as to why your profits dropped compared to last year.
Representation
This may come as a bit of a surprise, but having an accredited accountant representing your business might reduce the chances of your business being audited. Of course, having an accountant is no guarantee that a business is operating legitimately, but using a renowned and accredited service such as IBISS & CO will surely boost your business’s legitimacy with HMRC.
A large business owner who doesn’t want to hire an accountant to do their financials might indicate that they don’t want a third party to fiddle with their books as they might be doing something that they don’t want to make public. HMRC might launch an investigation to check how well you’re managing your accounts without engaging the services of a professional accountant.
All these instances can be avoided by hiring chartered accountants and business advisers in the UK who can help you navigate the complexities and ensure that your business is compliant and avoids investigations by HMRC. So if you’re looking for quality accountants and the best personal tax advisors in the UK, you can’t look past IBISS & CO.
They are one of the best-chartered accountants’ firms in Walsall that can provide you with quality tax services. They have significant experience dealing with complex tax and accounting matters. You can contact them today for more information.
About the Author
Mr. Moavia is an experienced accountant and tax adviser based in the UK. He has worked with some of the leading chartered accountant firms in the country and holds special expertise in tax planning. He has built quite a reputation by helping some of the biggest businesses in the country with their complex issues. His areas of expertise include corporate tax planning, VAT, inheritance tax, self-assessments, etc. In addition, he loves to write about different accounting and tax-related topics in his free time.
If you want to avoid the tax authorities, then eliminate the use of dodgy tax practices. Anyone can tip off the HMRC, and you’d be in a lot of trouble if the authorities find out that you’ve been undertaking unfair practices. The risk is not worth the pay-off. The cash-only policy is outdated and is one of the indicators that the business is avoiding paying tax. Card transactions have become quite accessible and cheaper. There is no need to carry out an organization-wide cash-only policy.
