The Institute of Chartered Accountants in England and Wales (ICAEW) has recently compiled a list of ‘top tips’ for small businesses that find themselves under investigation by HM Revenue & Customs (HMRC).
This came after a recent disclosure from HMRC that one in 10 small firms is under investigation after attempting to get back the tax they failed to collect in 2015-16.
The ICAEW advice includes keeping invoices and receipts for sales, purchases and business expenses.
As the ICAEW points out, HMRC will carry out a compliance check on a self-assessment, corporation tax return or VAT return if they believe that the figures are incorrect.
However, even if an investigation is instigated, most investigations are settled by reaching an agreement with the taxman. If this does not happen then firms can ask for a review of the decision or appeal against it.
In many cases, the whole matter can be wrapped up in a phone call. An office from the agency will call and explain why they have started an investigation and then will ask questions to ensure that the business in question is meeting their legal responsibilities.
From the replies, the officer will assess whether the business is capable of submitting an accurate tax return from its records. Or whether further action needs to be taken, such as a face-to-face visit. Depending on the outcome of a compliance check or business records check, a business may have to pay additional tax, and potentially face penalties.
Given that the thought of the taxman calling or coming into the office is very concerning for most small business owners, having professional support would be a wise move.