HMRC are increasing investigations into small businesses and Just Simply Organised can help you to be proactive and avoid a penalty.
Sole traders and smaller businesses have seen a rise in tax investigations. Comparing 2021 and 2023 the level of investigations by HMRC has grown by 21%……
While the thought of an investigation may fill you with dread, if you have been keeping up to date and efficient accounts, you should have little to be concerned about.
What areas of my business will an HMRC investigation cover?
HM Revenue and Customs (HMRC) will write or phone you initially to advise you of the areas of your business that they are going to look into. It could be:
- Any taxes that you pay – this can include VAT, Corporation Tax, Construction Industry Scheme (CIS)
- Your accounts and tax calculations
- Your Self-Assessment tax return
- Your Company tax return
- If you employ people, your PAYE records and returns, including your National Minimum wage records
Why might HMRC decide to audit your accounts?
HMRC do carry out random checks, but there are also some common triggers for a tax inspection. Examples can include:
- Incorrect figures on a tax return
- Frequently filing your returns late – this can be VAT, CIS, Payroll, Self-Assessment tax returns, etc.
- An unusual or sudden claim for a VAT refund
- Accounts showing a high turnover but a small amount of tax
- Significant changes in income from one financial year to the next
There are a high number of tax inspections triggered each year simply due to human error or not knowing exactly what your tax obligations and liabilities are.
Just Simply Organised can help advise on your obligations and ensure that your bookkeeping is accurate. Why put yourself at risk by not employing professional and experienced financial experts? We can help you to file your returns on time, every time.
What about a National Minimum Wage inspection?
HMRC do send letters to employees advising them to check that they are receiving the National Minimum Wage and report any concerns directly to them. They highlight the most common causes of being underpaid as being:
- A requirement to work extra time before or after a shift, which is unpaid, for a handover etc.
- Unpaid travelling time between assignments;
- Unpaid training time;
- Paying for necessary equipment or uniforms, which includes the requirement to adhere to a dress code, such as wearing only black and white clothing, for example;
- Failure to review hourly rates for salaried employees each year.
HMRC will need to see all of your payroll records, including contracts or letters of engagement, details of hourly rates, holiday and sick pay and hours worked.
Investigations into your accounts and payroll can be time-consuming. HMRC are likely to be looking at a minimum of four years’ records and they can ask to go back as far as 20 years if they suspect that there has been a deliberate attempt to avoid paying tax. Time spent on tracking down paperwork or accessing documents online while dealing with the inspection means you are spending less time on your business. This disrupts your profit and growth.
Having a regular and ongoing relationship with an experienced bookkeeper makes sure that your financial records are up to date and easily accessible. Returns are filed regularly and, if you do have an inspection, much of the information that you need will be readily available.
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA)
We believe in being proactive and managing your financial transactions accurately upfront will mean less pain down the line.
Just Simply Organised are front running the inevitable Making Tax Digital for Income Tax Digital for Income Tax Self-Assessment and encouraging all clients old and new to get in touch with us to plan what needs to happen now.
The need to file four returns in each financial year, plus an “end of period” statement (EOPS) and a “final declaration” is going to place an increased burden on self-employed business owners. It will create more occasions on which a return can be overlooked and filed late.
Do not wait until the deadlines come around as this could mean you are not compliant. Working together now can save a lot of unnecessary stress and protect you from investigations.
Get in touch with the Just Simply Organised team today for your free consultation.
info@justsimplyorganised.co.uk 01892 770612
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