3 ways to avoid HRMC Red Flag against your business
With HMRC’s move to Making Tax Digital and the growth of a cashless society you’ll soon be expected to account for every business transaction made. If you can’t you could face a gruelling HRMC investigation triggered by a red flag.
A red flag is triggered if cash is used too often to pay expenses, living beyond your means with no relevant income or use cash to buy property, cars or boats. All signs of possible tax evasion.
A word of caution. A red flag trigger can be as simple as not completing your tax return accurately.
“HMRC raised an extra £489m last year by targeting small businesses in tax probes”.*
The number of small businesses and entrepreneurs with a red flag is on the rise. Many SMEs are feeling singled out by HMRC investigations. There’s a simple explanation why investigations and successful prosecutions against SMEs is so high. It’s down to small businesses lacking robust accountancy systems.
HMRC has highly sophisticated software ‘Connect’ that compares information trawled online and easily picks up anomalies or discrepancies in tax returns triggering red flags.
Without good bookkeeping and accountancy software small businesses make mistakes and risk investigation.
Best way to avoid hefty fines, severe financial penalties and worst case scenario criminal charges is to follow our 3 simple steps:
3 tips to avoid HMRC red flag
- Speak to an expert
If you have any doubts about your return and worry about an investigation speak to a professional to review your books.
- Use an accounting system
Many start-ups and fast growing entrepreneurial businesses don’t have robust accounting systems in place. That’s why they fail under HRMC scrutiny.
- Never attempt to hide money
With the steps towards Making Tax Digital financial transactions will be tracked. You must account for all transactions.
At Murrison & Wilson we’re tax experts and easily spot potential red flags. For you it was an honest mistake inputting the numbers but for HMRC’s computer it’s considered carelessness at best and attempted fraud at worst.
If you do receive a letter from HMRC about an investigation, above all stay calm. Speak to a tax expert before rushing a response to HMRC. It’s not just an accountant that will advise speaking to an expert but HMRC itself.
The tax expert will take the heat out of a red flag. An expert establishes the level of tax investigation you face, identify next steps to take and manages communications with HMRC on your behalf.
If you’ve not long started a business get in touch with Murrison & Wilson now.
It’s not just your future you’re safeguarding but avoiding HMRC coming after you for past mistakes.
If you have any concerns or questions about your tax return or are facing an HMRC enquiry please do get in touch on 0141 290 0262 or email .
Bruce Wilson, Director, Murrison & Wilson
*Research by UHY Hacker Young