In the last few years, there’s been no shortage of reports about celebrities and major organisations falling foul of HMRC – and last year, a rejuvenated HMRC reported a 29% increase in tax avoidance prosecutions.
However, we all want to make sure that we legitimately claim as much as we can against tax, keeping hold of our hard-won freelance earnings or business profits. So what can we do to make sure we’re walking the right side of the line – and not attracting unwelcome attention from HMRC?
Retain all your financial paperwork – from the receipt for that emergency sellotape purchase round the corner, all the way up to large invoices. The majority of it will probably never come under the x-ray glare of HMRC, but if they ask to see it, it needs to be there.
Organise paper copies. Accountants are great, but if your office is to paperwork what the Arctic is to snowdrifts, there’s a limited amount they can do to help. At the very least, file paperwork, invoices and receipts in a drawer or file that has monthly divisions.
Record all your financial transactions regularly and accurately, whether you’re doing your own bookkeeping or not.
Employ a great accountant. Whether you let them handle all your bookkeeping and financial affairs, or just use them to do your tax returns, having a good accountant in your corner means you’re far less likely to find HMRC officials knocking on your door with their cross face on. They know exactly what you can claim for and what you can’t, ensuring you stay in HMRC’s good books. At the very least, they can act as a point of contact for the HMRC and handle any queries, but employ them for a full range of services and you’ll have no worries about the accuracy of your bookkeeping, the flawlessness and punctuality of your tax returns or the legitimacy and wisdom of any growth plans or transactions. Given the chance, they’ll ensure you save money on your tax bill long before tax return time.
Remember that penalties for late tax return submissions can be expensive. Be aware of the deadlines and if you’re doing your own tax returns, build in plenty of time to organise your records well before the deadline. The task will seem less overwhelming if you’ve regularly kept on top of the paperwork and you tackle your tax return completion in stages.
Educate HMRC have a wealth of advice and information on tax returns and bookkeeping, including forums, seminars and webcasts.
Read any tax forms thoroughly and fill them in carefully. The guidance notes are – you’ve guessed it – to give you guidance. HMRC want to make the process easy for you, but if you just plunge straight in without reading the instructions and guidance properly, you’re likely to get your submission returned and possibly queried.
Submit your tax return on time. Every time.
Of course, HMRC sometimes carry out random inspections, so there’s no need to be instantly paranoid if you discover they’ve got their beady eye on you. If you’ve followed the steps above, it shouldn’t matter.
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We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!