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January 24. 2017

Keeping the taxman at bay

Let’s talk about how and why HMRC Investigations happen, this week’s tip explains the best way to deal with an enquiry and keeping the taxman happy.

Once the Revenue has taken up an enquiry, it is in the taxpayer’s interest to settle the enquiry as speedily as possible by cooperating with HMRC and providing them with any information they request as they do have statutory powers that they can put in place if they don’t get the information that they require within specified periods of time. 

The length of an investigation can vary from months to sometimes years depending on what HMRC find and how they decide to progress.  During an enquiry, the Revenue may well look at your personal expenditure as well as your business records.  It is important that you can also account for entries on your personal bank, building society and credit card statements as well as your business statements.  The Revenue will often deem receipts that you cannot account for as undisclosed business income.

Clearly, the best way to avoid having an enquiry into your tax return, is to ensure that when your tax return is submitted it includes accurate and complete accounts information and that it also gives full details of all your non-business income such as any bank or building society interest, income from property, Capital Gains etc.  This may be stating the obvious but it can only be achieved by keeping full and accurate records:

-You should always record all sales and business receipts as you get them and retain the records;

-You should keep back-up records, for example, invoices, bank statements and paying-in slips to show where the income came from;

-You should record all purchases and other expenses as they arise and ensure, unless the amounts are very small, that you have, and retain, invoices for them.

It is important that each entry is recorded as and when it happens.  By doing this, it reduces the chance of you omitting or entering an incorrect amount if you have to record it on your records some weeks or months after the event. 

You will see from this how important it is for you to keep accurate records in both your personal and business dealings.  By doing this, the chances of you getting a letter from the Revenue will be considerably reduced.  However, if you are unlucky enough to still be selected for an enquiry, your hand is much stronger when you can produce accurate, well-kept and timely records.

The FBTC online cashbook is a great way to record your business income and expenditure. Have a read of the FBTC Online Cashbook "Simplicity at its best!"

If you have any questions about Revenue investigation or the online cashbook, please get in touch;

Call 0344 984 4445 Email  info@fbtc.co.uk


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