Is your business ready for a tax audit?
Managing a business can be time-consuming. With so many things to keep on top of, it’s necessary to put some tasks on the back burner, but your tax returns shouldn’t be one of them.
Keeping an eye on your business is essential, especially as HMRC’s tool can select your business to audit at random. While the chances of this happening are low, it’s always a good idea to get your business’ affairs in order – just in case.
It’s good practice to keep a record of everything that goes on in your business, right down to documents that could impact your tax status. In a tax audit, HMRC will look into your business and if there are gaps in documentation, or if there are any documents missing, this could pose a problem. To avoid mishaps like misplaced documents, we recommend you make a detailed record of your business’ operations and back this up on an external hard-drive. Actively backing up your documents away from your current system is important because it gives you a spare business record at hand in case of damage or theft of property. Alternatively, many firms are now choosing to file records via the cloud, where the risk of misplacement or theft is significantly low.
Just like your business, your tax documents need to be organised. While you can’t do much in the way of avoiding a random tax audit from HMRC, you can prepare by getting your business’ house in order. By arranging your documents in a system, you can make it easier to store important documents and make the audit itself easier for HMRC to conduct. A clear and orderly document system will help demonstrate tax transparency. It also works a treat as you will be able to easily locate specific documents and potentially cut down on the time it takes to audit your business.
Contact a professional
Tax is a niche aspect of business, therefore it’s a good idea to seek professional advice if your business is subject to a tax audit. Experts like your business’ external auditor will know which documents HMRC will be looking for and what steps you, as a business owner, will need to take. Your tax accountant can also provide assistance by locating documents that show an accurate and up-to-date reflection of your business. Having professional advice and services on hand can lessen the stress on you, and in some cases reduce auditing time. If you’re unsure about tax, it’s always best to ask a professional.
It’s better to be safe than sorry
As with all things, it’s better to be safe than sorry. And when it comes to tax audits, being prepared for them can go a long way in demonstrating you are actively taking charge of your business and its finances. By taking the steps above, and being proactive in your business’ operations, you can avoid floundering if you do receive a tax audit request. And instead present a well-recorded, organised, and professionally informed business that is tax audit-ready.
For further guidance speak to our team today.