According to recent reports HMRC has increased the number of small business investigations and they continue to be seen as soft targets.
About 7% of tax inspections are random, the majority are triggered because HMRC believes that something is wrong.
What can you do to reduce your chances of being selected?
- File your tax returns on time and pay what you owe – If you file late or at the last minute HMRC will think you are disorganised and as such there are more likely to be errors in the return
- Declare all your income – HMRC obtain details of bank interest and other sources of income, sometimes they test them and match them to returns.
- Use an accountant – Unrepresented taxpayers are more likely to be looked at, mainly because many of them don’t know what they are doing.
- Trends – if your business doesn’t match the profile of similar business in the same sector or your results suddenly fluctuate it could raise concerns at HMRC, for example, if you suddenly request a VAT refund.
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