Taxing Stuff,Topical Issues

The Taxman cometh…27 Jul

Alaister Darling recently admitted that the economic downturn will reduce the Government’s tax take, leaving an alleged £23 billion hole to be filled. HMRC is under instruction to improve its tax collection techniques, which it is already doing by launching more investigations.

So, what’s changed?

Under new guidelines, a rise in expenses of 10% year on year could prompt a tax investigation, compared to a previous threshold of a 20% variation. The Revenue’s recently updated computer systems are red-flagging anything out of the ordinary, or usual trading pattern, for example:-

  • changes from prior year, i.e. rental income for years, then none, but no Capital Gains on disposal.
  • consistent turnover at a VAT threshold
  • provisional figures
  • capital gains

What can YOU do to keep under the radar?

Do your own comparative analysis on…

  • Income – turnover and gross profit
  • Expenditure – employee costs, pension costs, repairs, entertaining
  • Balance sheet – stock and WIP. Use accurate figures. If using estimates, make them look realistic and check assumptions.

Keep records of any private use. Be able to explain any where any extra deposits come from; they may be additional taxable income.

As usual, it is essential to keep all supporting paperwork. In addition, should you receive a query from the taxman, respond promptly. The Revenue is more likely to think you have nothing to hide if you do not delay.

Contact Julie or Aileen at accounts@fabaccounts.com for any additional advice, or leave us a message below. We can now offer tax investigation insurance, which will cover your professional fees in the event of an unwelcome visit from HMRC, and give yourself peace of mind. Phone us for a quote today on 01933 356286.

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