Business tax is difficult to deal with at the best of times, but when things go wrong? Then it’s even more headache-inducing. Tax problems can result in HMRC audits and potentially even fines, even if you didn’t voluntarily do anything wrong.
In fact, most businesses that have issues with their tax situation do so because of an innocent error. Unfortunately, even innocent mistakes can cause big problems for businesses.
In this post, we’re going to run through a few handy strategies that can help your business avoid problems with the tax authorities. Many of these tips will also simply make running your business more straightforward, too.
Know the Deadlines
Knowing the deadlines for tax filings is essential not only for giving yourself enough time to get everything prepared but also to avoid being late. Failure to meet tax-related deadlines is a surefire way to get in trouble with HMRC, which will automatically issue a fine if you don’t submit on time. The tax authorities take deadlines seriously and don’t accept excuses, even legitimate ones. Missing deadlines can have a compounding negative impact, too, since it’s often more difficult to make things right once you’re playing catch-up. Understand what you need to file and when, and make sure you’re ready well in advance of the deadline.
VAT Issues
Registering for VAT can offer significant tax savings, but it can also cause problems in certain situations. For instance, reclaiming VAT on personal items or charging the wrong rate can get a business in trouble with the authorities. It’s also important to check VAT number UK, especially when you’re setting up an arrangement with a new supplier or making a big-ticket sale. Trying to claim VAT with fraudulent VAT numbers can result in fines and HMRC audits. In addition, checking a company’s VAT number before doing business is a good way to protect your business, since it’ll show that you’re dealing with a legitimate company.
Proper Bookkeeping
Failing to put in place sufficient bookkeeping measures is a surefire strategy to have tax problems. Not only will it make it more likely that you catch the attention of HMRC, but it will also likely reduce your opportunities to make tax-related savings. After all, you can’t claim tax savings if you don’t have the supporting documents to submit as evidence. Even a simple spreadsheet can work for small businesses, though there’s also plenty of great software tools available.
Plan Ahead
Finally, businesses can avoid tax problems by proactively planning for their tax liabilities, which will help to prevent being caught off guard when it comes time to make a payment. This process decreases the chance of experiencing cash flow problems if the bill arrives unexpectedly, and also reduces the risk of having to pay fines due to late payment (because you don’t have the cash to hand when payment is due). It’s recommended for businesses to keep their tax liabilities in a separate bank account, so it’s not easily accessible and won’t get mixed up with your day-to-day expenses.
