Small businesses under scrutiny from HMRC
Posted on in Business News , Cycles News , Creative News, Outdoor News
HMRC investigations into small businesses have raised £8.4bn, compared to £3.9bn from scrutiny of big businesses.
Small businesses, have found themselves at the wrong end of a tax-take after HM Revenue & Customs clamped down on VAT abuse.
HMRC's VAT take increased 51 per cent between 2011-12 and 2012-13.
Kevin Igoe, managing director of business and individual insurance company PfP, said HMRC's crackdown had been particularly onerous for small firms, with the amount of additional VAT raised as a result of HMRC inspections rising from £3.5bn to £5.3bn over that period.
He said that over three years, local HMRC investigations over small firms had taken an extra £8.4bn in VAT, more than double the £3.9bn from its scrutiny of big businesses.
Mr Igoe said: "We are seeing an increase in VAT compliance activity across the board. Failure to correctly deal with VAT, even if not deliberate, could result in hefty interest and penalty charges."
While a minority of compliance visits are purely random, most are undertaken because the HMRC think there will be something to find.
How to minimise the risk of an investigation
- File your returns on time. Ensure you know all the deadlines such as your company tax filing deadline, the PAYE filing deadline (19th May each year), and get your personal tax return filed each year by 31st January.
- Pay your tax on time. Just as important as the above, make sure the HMRC receive their money on time. Direct debits work great with VAT, and remember tax bills can be paid by credit card. Regardless of improvements in transaction speed between banks, always allow 3 working days for your tax payment to reach the HMRC
- Keep records -It shows you are professional in your approach to running your business, and will help answer any queries the HMRC may have regarding any tax or accounting transactions. This includes keeping copies (hard copies or electronic are acceptable) of all your invoices, all your receipts, all your business bank account statements, and any other relevant company documents like share certificates, directors loan agreements, and dividend vouchers.
- Take the time to review your accounts. Avoid the temptation to simply sign off what your accountant has prepared for you. If a figure looks unusual contact your accountant and ask them to explain. At the end of the day it's your company, your tax, and your responsibility.
- Never conceal anything from the HMRC, and don't think you can tell half-truths.
In most cases if your business is selected for a compliance visit it will be because the HMRC suspect you may be doing things incorrectly. If you file your returns on time, pay your tax on time, and explain any large variations to current year figures compared to previous year figures, then you will be sending a strong message that you know what you are doing, that you understand your responsibilities, and that you are running your business in a compliant fashion.
However, if you are ever sought out for an investigation, ActSmart's subscription packages come with tax investigation protection as standard, so you can be safe in the knowledge that you'll be covered against any of the costs incurred as a result of having to supply information to HMRC.
If you need any advice on what your business is required to do, ActSmart subscribers have 24/7 access to our business support and legal helplines which can help you to stay up to date with HMRC changes.
Need an accountant?
ActSmart have partnered with AIMS, who specialise in the accountancy needs of independent businesses in today's economic climate.
AIMS accountants all work with fixed fees agreed in advance and do not charge by the hour. This unique structure means they establish genuine client relationships, getting to know you and your business inside out, providing essential support without the concern of a large bill at the end of the year.
To find out more click here.