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Tax investigations are on the rise. With many high profile tax dodging cases in the news, HMRC have taken a stand, and more companies than ever will find themselves the subject of an investigation. A small percentage of these will be random, keeping companies of all sizes on their toes, but the majority will be due to tip-offs or because the HMRC has reason to be suspicious. Therefore, there are a few things you can do to avoid being the subject of an investigation.

Remember that ignorance isn't an excuse

Small businesses who are under investigation may find they've fallen foul of the law without even knowing it. They may have neglected to get up to date tax advice, or misinterpreted the rules and not paid the correct rates. Unfortunately, a lack of knowledge about tax isn't a defence if HMRC decides to investigate, which is why getting professional advice is so important. This will help you avoid lengthy investigations and a big bill for back taxes.

Try to keep your figures steady

Companies whose numbers fluctuate wildly from year to year can find themselves under investigation by HMRC. This could be because of:

  • Rapid growth
  • Needing to take on more staff
  • Making a big purchase such as new premises
  • Landing a big client

Most of these things can't be avoided, but if you have a lot of investments you want to make then you might want to consider whether to do them all in the same tax year. If you are under tax investigation, companies such as Associate Services can advise you on what steps to take, and this can help keep investigations shorter, meaning you can get back to your important work as soon as possible.

File on time

Filing on time and ensuring that there are no errors can help you avoid a tax investigation. You may prefer to bring in the professionals to do your tax returns, as they'll know exactly what needs to be declared, and which forms should be submitted. Making sure the right forms are filled, and the money paid on time, will help keep HMRC from needing to follow things up. The tax rules can be complex, with lots of patterns and behaviours potentially triggering an investigation, so by having the same firm do your taxes year after year, you can keep things consistent.

No company wants a tax investigation. At best, they can be a minor inconvenience, meaning you have to dig through your accounts and produce old tax records. At worst, they can disrupt your business and could potentially lead to a big tax bill at the end of it. If possible, try to avoid investigations through good bookkeeping, paying tax bills on time, and ensuring that you use a reputable tax firm to do your returns. However, if an investigation does come up, then it's worth getting an expert on your side to help, so you can ensure it's resolved quickly and fairly.