Tax inspection is every business’s nightmare. It’s tedious and time-consuming, and not exactly a trip to Alton Towers. Taking steps to stay off the tax inspection list is a great way to keep HMRC off your back, and keep your accountant happy. Unfortunately not all people take these measures, here are five triggers for tax inspection – make sure you avoid them!
A Bad Accountant
Not having a reputable accountant can be the difference between a lengthy tax inspection, and none at all. The value of a good accountant is priceless, as they can keep you accounts in order and out of HMRC’s firing line.
However, there is only so much an accountant can do. You need to be savvy about your accounts and know what’s what, rather than just dumping a bunch of receipts on your accountant’s desk. Know what you’re up to when it comes to PAYE to avoid any confusion – it will only increase the likelihood of a tax inspection!
Not having a good accountant, coupled with not knowing about your own accounts, all adds up to messy accounts. Produce good records, tidy accounts and clear tax return to give yourself the best chance at avoiding a tax inspection.
Unexplained or unusual fluctuations in turnover or profit are an instant red flag to the tax inspector. There is extra space provided on the tax return form which should be used to explain any of these unusual fluctuations if necessary. If you leave no stone unturned, then you’re more likely to avoid an inspection, and give HMRC some peace of mind!
Your accountant’s credibility rating can also have an effect on the outcome of your return. A diligent accountant that identifies problems early on with the correct records provided by you will also give your business less reason to be inspected.
Inaccurate and Incomplete Forms
An obvious one really. Not doing everything HMRC ask you to is the equivalent of walking into a HMRC office with the words ‘READY FOR TAX INSPECTION’ written on your forehead. Complete your forms with as many details as possible – and make sure they are correct!
What are your tips for avoiding tax inspection? Have you had one and have some useful advice? Leave a comment in the section below!