As the deadline for self-assessment tax returns looms large, many small business owners and self-employed businessmen and women will be frantically trying to get their tax affairs in order.
Such a process can be daunting and leaving it so late in the day will do little to help. But according to Roy Ashton, a former HMRC (as it is now known) tax inspector and now director of Titcheners Chartered Accountants, businesses that play by the rules have nothing to fear.
With his experience of working on both sides, Ashton offers the following insights into the way HMRC works and what's expected of you:
Excuses, excuses,
excuses
People use any number of excuses to justify their lack of
action but they are reasonably predictable and include: natural disasters (‘my
paperwork was damaged by flood waters'); animals (‘the dog ate my tax return');
criminal activity (‘my forms were stolen from the back seat of my car').
Although it's possible that some people will suffer these and other
misfortunes, rarely will the excuse for failing to provide information prove to
be legitimate.
No stone left
unturned
What many people don't realise is, regardless of the reason
they offer for not providing their paperwork, just how sophisticated the
authorities are when it comes to tracking these matters. HMRC is not there to
charge people too much tax, it's there to ensure people are paying the right
amount and there are numerous processes that inspectors can go through in order
to check that the claims and information submitted by and on behalf of
businesses are accurate.
Honesty's the best
policy
It can be very clear why some people struggle to deal with
the Revenue. One of my clients came from South Africa, where he had
experienced the problem of Apartheid and the resultant police brutality first-hand.
As a result, he had developed an inbuilt fear of authority and, after moving to
the UK,
was uncomfortable dealing with government institutions such as HMRC.
He continued in business for years, avoiding the letters and calls from HMRC out of fear over what the authorities might do if he acknowledged them. He eventually approached me to explain the situation, at which point my firm began the painstaking process of back accounting 13 years' worth of tax returns and helping him to minimise the risk to which the business had become exposed. Clearly in this case the fear was legitimate but, regardless of this, the failure to file these returns was only serving to worsen the problem. On this occasion, incidentally, HMRC accepted the arguments and dealt with my client leniently.
Supply accurate
information
The challenges related to tax do not just involve evasion. I
used to work with a nightclub which organised large scale events. On one
occasion the client was disputing a VAT bill relating to unsold tickets. HMRC
had been provided with information on how many tickets had been printed for the
event, but not how many had been sold and was demanding VAT be paid on the
basis of the former. This significant discrepancy was eventually resolved
through providing the inspectors with evidence of the sales, but this serves to
illustrate the importance of supplying accurate and comprehensive details.
Don't go it alone
If you are in a position to afford it, you should engage the
services of an accountant. They will be able to help you provide the right
information, ensure that you are paying no more or less tax than you should be
and to reduce the level of risk that the business is exposed to. Ensure that
you have selected an accountant which offers the right services for a business
of your size and is a member of a recognised professional body such as the Institute of Chartered
Accountants in England
and Wales (ICAEW) and the Association of Chartered Certified Accountants
(ACCA).
If in doubt, be
direct
If you are not in a position to use an accountant you should
make a direct approach to HMRC to ask for help. It is surprising how far HMRC
will go to assist businesses to get them back on track. If you are concerned
that you may have outstanding tax payments it would certainly be worth
discussing your business' situation with an accountant to fully understand your
options and their respective implications.
As with so many things in life, it is far better in the long run for you to act sooner rather than be caught out at a later date, especially as criminal proceedings against those found to be blatantly flouting the law are becoming a far more common occurrence than ever before.
