Taxes are a bane of many taxpayers’ existence, but filing the right documents is never as straightforward as it seems. When errors are found in your records, they can catch the HMRC’s attention and result in an unwelcome HMRC tax investigation. This often results in a myriad of costly consequences for businesses, so you can imagine the negative impact HMRC investigations can deal on self-employed individuals.
What Happens in an HMRC Tax Investigation?
An HMRC investigation involves checking your financial affairs and ensuring all taxpayers meet their obligations. Typically, an investigation will focus on areas such as the following:
- The tax that you pay;
- Tax calculations;
- Yearly Self-Assessment tax returns;
- Company Tax returns;
- PAYE records if you’re an employer;
- VAT returns and records if you’re VAT-registered;
HMRC investigations can also unfold in different routes, all of which depend on the severity of your suspicion. Here are three ways HRMC investigation happens:
- Full Enquiry – this is a form of HRMC investigation that requires their full attention since it involves taxpayers with high risks of errors in their records. As the moniker suggests, a full enquiry looks into all your business and personal records.
- Aspect Enquiry – this is a form of HRMC investigation that only happens when they have a small concern over a specific detail or error in your returns. Aspect enquiry typically occurs when people, especially self-employed individuals, make honest mistakes when filing their finances.
Handling taxes as a self-employed person can be trickier since you’re juggling plenty of crucial responsibilities, leaving you with more room to make mistakes in your preparation. But what are key reasons the HMRC would take the time to investigate the self-employed?
Learn more about HMRC tax investigation with our expert tax accountants in London
Common Triggers Behind HMRC Tax Investigations for Self-Employed:
- When your returns reveal your small business is not profitable for years;
- When your returns are regularly riddled with errors;
- When your reported figures showcase substantial fluctuations;
- When your figures — be it income or expenditures — are unusually high for your industry and current scale;
- When your report reveals your directors are earning less than your employees;
- When the HMRC notices you’re failing to record all your income;
- When the HRMC notices you don’t have an accountant, which can trigger their concerns.
The Bottom Line: The Importance of Having Professional Accountants Handle Your Taxes
There’s no doubt that established enterprises and freelancers alike strive to avoid triggering a full enquiry HMRC investigation, but it’s better to steer clear of alarming them in the first place by hiring affordable accounting services to keep your tax preparations free from stress and errors.
Filing for taxes can be a hassle for you. If you find yourself in this situation, employing the services of cheap accountants in London can save you a great deal of time and money.
Are You Looking for Cheap Accountants in London?
Anything related to finances can be incredibly confusing, and for this reason, it’s best to work with reliable accountants like Cheap Accountants in London.
We provide tailored accounting and taxation services and assist small and medium businesses. With over 40 years of combined experience, we can assure you that we only offer the best services in bookkeeping and taxation. Learn more about our services today!