We often get asked what make me more likely to have a tax investigation? Whilst only HMRC can answer this question, we at Sherwin Currid Accountancy think these factors may influence selection, and a letter from HMRC coming through your door!
Whilst it must be noted a good proportion of inspections are purely random, around 10%, to keep everyone on their toes! There are proactive things you can do to manage the other 90% and your risk of an inspection.
Get your paperwork right
Late or incorrect paperwork/return(s) are bound to attract attention from HMRC, this put you more at risk of an inspection, plus the fines and penalties which may accrue.
Check your figures
HMRC have been taking much more interest in ratio analysis. This is where they analyse company figures from one year to the next, and take interest in any significant changes. HRMC may raise an aspect inquiry to look at specific figures. Common sources of aspect inquiries are high repair and maintenance costs, or legal and professional fees out of step from previous years.
Keep up to date with HMRC targeted sectors and HMRC campaigns
Keep an eye out for sectors/areas which HMRC are targeting. HMRC often has compliance campaigns targeting certain sectors or professions. Recent campaigns have included Solicitors, Property and internet traders. If you are within a group targeted you will become more likely to be investigated.
Use an Accountant
By using an accountant it reduces the risk of mistakes and errors arising in your tax returns and accounts. Always remember that ultimately the responsibility for your tax returns lie with you, not your accountant plus an accountant can only do as good a job as the records they are presented with. Thus business owners should keep good records and this should filter through to good compliance and accurate returns.
Keep your nose clean
Previous history. If you have been involved in tax schemes or have had an investigation previously then this may make you more likely to have another investigation.
Avoid missing income
Ensure all your sources of income is recorded in your tax return. HMRC has access to information from a wide variety of sources, and by missing out or putting incorrect information in your return, may make HMRC more likely to investigate you.