Why might HMRC start a tax investigation into your business?
When it comes to running your own business, making sure you have your accounts in order is key. It is also essential to submit any tax returns to HMRC on time. Whether it is the simple end of year accounts for sole traders or more complex tax reporting for Limited Companies, this is an area you must get to grips with. You may have also heard of HMRC selecting certain businesses for a tax investigation after returns are sent in. This basically sees inspectors look through your records to verify that your returns are correct. Needless to say, any discrepancies can prove very serious. But why might your business be chosen for a tax investigation?
Errors or inconsistencies in returns
Compliance checks can be triggered when the figures you submit on a tax return are obviously wrong. If for example, you own a large national business with significant turnover but declare a small amount of tax, HMRC would find this suspicious. This would then be likely to trigger a tax investigation, so they could verify your figures. It might also be down to inconsistencies in your return, missing figures or the fact it just doesn't make sense. If there is doubt like this, tax inspectors will want to clarify matters in person usually.
Tip-off from someone else
While most compliance checks are set off by incorrect, incomplete or non-sensical returns, there are other reasons you could be chosen. One you might have heard of before is HMRC getting a tip-off from someone who claims you are not being truthful in your tax returns. While there will usually need to be some proof of these claims provided first, this could be the reason tax inspectors wish to see you.
Of course, it might just be that you are unlucky! Compliance checks are also made at random sometimes and see businesses chosen without any real reason. These random spot checks are designed to keep businesses on their toes and put them off from cooking the books. It hardly needs saying though that they are a real pain for the vast majority of honest business owners out there. Sometimes it is just a case of bad luck that sees your name pulled out of the hat for a check.
Help with tax compliance checks from Taxcare Accountancy
It goes without saying that having to endure a compliance check from HMRC is a real chore - whatever the reason behind it. Why not let the experts at Taxcare Accountancy help if it happens to you? Our tax investigation & tax tribunal support service means you do not have to face it alone. We will be there each step of the way to offer professional advice and guidance. Contact us at firstname.lastname@example.org today for more details.