Do you want to know about HMRC tax investigation? It may be worrying for all kinds of business though there are other ways to make the entire procedure trouble-free for you. Read through this post to know about tax investigations in London for your small businesses.
About HMRC tax investigation
HMRC has every right to authenticate the affairs anytime and ensure you pay the correct tax amount. When your business has been chosen, you will obtain the official HMRC phone call or investigation letter where they inform what they want to consider. This include certain thins such as:
- the amount of tax you need to pay
- your tax and accounts calculations
- VAT returns and records when you have been VAT-registered
- Tax Return of your company
- Self Assessment tax return for the said year
- PAYE returns and records for being an employer
Three kinds of tax investigation
- Full enquiry – When conducting a full enquiry, HMRC assesses the whole business transactions as there is considerable risk in the tax calculation. While making an investigation for the limited companies, they will take a keen look into the company directors tax affairs as well as the business affairs.
- Aspect enquiry – The HMRC considers specific aspect of the accounts that includes inconsistencies in the section of tax return at the time of an aspect enquiry.
- Random check – Random check might occur at any point of time despite your accounts statement or if you have received any alert.
About tax investigation procedure
During a tax investigation service in London, the HMRC team will be conducting an audit of the accounts and ask some questions. They may even ask to visit you at your home, office or accountant’s office.
Types of taxes under scrutiny
- Corporation Tax
- VAT
- Capital Gains Tax
- IR35
- Construction Industry Scheme or CIS
Necessity for a tax investigation
If there is some kind of unusual activity in the accounts or tax records, then this might flag you for the tax compliance check of HMRC.
Most checks can be triggered through the Central Risk team of HMRC by using data mining tools to detect abnormal activities on accounts in specific industries.
The common trigger for an investigation is the submission of inaccurate figures on tax return. So, you need to hire an accountant who gives professional advice related to accounts and check over tax returns before sending them.
Other triggers are the following:
- industry where you work is high risk
- someone giving an alert for HMRC to unusual activities in your accounts
- obvious inconsistencies between the tax returns
- filing tax returns late often
- your accounts do not match with the industry standards
Effective tips for accounts
Update your books on regular basis – It is important to maintain and update books regularly. This will enable you to understand how your business finances are going. By keeping the records updated, you can get vital information soon and respond to audit enquiries of HMRC without finding those scraps of papers. Three things to do and keep your books in proper order are:
- Your account balance should match with the balance in the accounting software
- Maintain copies of the invoices for the money you get
- Keep all the receipt copies of all the costs for your business
Avoid accounting mistakes prompting tax investigation – You should keep the records up to date and in case there is any problem in the books, you may call your accountant for help. Some mistakes that should be checked in your accounts include:
- distribute costs to wrong category
- match receipts with wrong invoice
- consider a cost as tax-deductible when it is not
- post costs as extra expenses than making bank payments
- give wrong amount for VAT
File your self evaluation and VAT return – The HMRC will possibly choose your accounts for assessment when you need to submit the tax or VAT returns after due date. Your accountant will calculate your tax liability so that you may file Self Assessment tax returns and VAT returns directly to the HMRC.
When it is the right time to file your tax, you have to check the data, fill in all the missing details and then submit your Self Assessment tax return or VAT return directly to HMRC.
You may give the accountant access to your account so that he can check that the information on your returns is accurate and they may even file for the tax for you, when you give them the permission for it.
You may search the Internet for tax investigation services near me and hire a good accountant who can help you with all kinds of financial transactions for your business. Thus, your clear and up-to-date records will allow you to have an open enquiry with the HMRC and know how your business is doing on a regular basis. This will allow you to solve any problem related to your accounts before they turn into major concerns.