There’s a Nasty Bug Going Around
Around this time of year there are a number of cases of individuals coming down with similar symptoms. Sweaty palms, nervous stomachs and an unwillingness to face the day. No, it’s not seasonal flu, it’s just January. Personal tax returns are due by the end of the month, and 31st December is the most common company year end. Therefore this time of year brings with it another year of HMRC trawling through everyone’s submissions, looking for inconsistencies that might trigger an investigation.
Whilst in some cases, HMRC do randomly pick companies and individuals for a spot check, given the wealth of data they have at their disposal now that tax returns are all electronic, if your business is selected for a visit it will be because HMRC has spotted something that they feel warrants further investigation.
So you’ve received an innocuous letter stating HMRC would “like to review your business records”?
1. As Capt. Mannering famously remarks, “Don’t panic!” An investigation often brings on a number of unpleasant emotions in those on the receiving end of HMRC’s gaze. The language in the letters is designed to be blunt but should only phase the unprepared.
2. If you haven’t already, get on the phone to your accountant for some independent advice. You will need somebody on your side that understands HMRC’s modus operandi and jargon who can take some of the emotional strain from your shoulders.
3. Don’t assume HMRC is unaware of something, and certainly don’t lie. HMRC have a huge database of their own information and collaborate with other government departments to complement this. If they catch you out (and it certainly happens), all credibility is lost, so be upfront in the first place.
4. HMRC will be keen to meet to discuss your records. Have you accountant on hand to help prepare. You will need to ensure you have met the three “prevention” points above as well as can be, and the accountant can field some of the trickier questions.
Prevention is better than cure
What’s the best way to alleviate these symptoms then? Don’t get on the taxman’s radar in the first place!
1. File your returns on time. It might sound basic, but there is a lot to keep track of, depending on your circumstances. Make sure you know your VAT (1 month and 7 days from quarter end), Corporation tax (9 months and 1 day from year end), PAYE (always 19th May) and Personal tax (31st January) deadlines.
2. Pay your taxes on time. You wouldn’t’ sit by while a customer is standing you over on a big payment. This is just as important as the returns above, make sure you pay HMRC on time and in full. To make this easier they suggest same day bank transfers and direct debit payment.
3. Keep your business records in good order. It gives a good impression to HMRC if you are able to easily retrieve information from a well maintained accounting system, be that Sage, a filing cabinet, or similar. You are required to keep copies of all your business records for 6 years, so make sure you have everything kept safely somewhere, not stashed in the shed behind the lawnmower. You should remember that penalties up to £3,000 can be charged if records have not been kept for five years from filing date.
4. Barnes Roffe is able to offer our clients a comprehensive fee protection package at competitive rates. Professional fee protection is designed to reimburse you/your company for the costs of representation (such as accountancy fees) in the event that you are selected by HMRC for enquiry. With the costs of representation properly insured, the taxpayer is not obliged to accept unreasonable or opaque tax assessments from HMRC and you have the peace of mind you can defend any investigation. Our clients are strongly advised to subscribe to the service. Tax enquiries can cost many thousands of pounds and take several years to settle.
If you keep all your affairs in impeccable order, your chances of an investigation drop significantly, but if you are fortunate enough to be chosen regardless, our points above can help alleviate the stress, and our fee protection can cure any financial concerns.Talk to Barnes Roffe today