KEEPING THE TAXMAN AT BAY
1. Keeping proper accounting records will reduce the risk of errors that that may result in extra tax, penalties and interest by HMRC in case of tax enquiries.
2. In the event of a vat inspection by HMRC, ensure that your records clearly shows the output tax on income backed up by an invoice.
Similarly, for all your input claims, ensure that you have a proper vat invoice showing the vat number for each claim.
3. The Tax year for 2021 is from 06 April 2020 to 05 April 2021.
You may file a paper tax return, if it is filed by 31 October, in which case HMRC will calculate your tax liability.
If you file your return after 31 October, the final date for filing the return is 31 January and you should then calculate and pay your tax liability.
4. HMRC will also accept to collect up to £3,000 of tax via your PAYE coding provided your return is filed by 31 October if in paper form or by 31 December if filed on line.
5. You can make a claim to reduce your payment on account if your taxable income decreases in the following year.
6. In the event of a visit or an enquiry by HMRC, you can ask for their queries to be put in writing rather than rush with answers without any proper thought as that may prove to be costly.
It is always better to consult your advisor to check for any demand for tax by HMRC, if there is one.
7. Ensure all your vat or other tax return and payment are both made within the time limit, since if either the return or payment is late, this will trigger a penalty.
8. If you are a UK resident tax payer, ensure that all your sources of income, UK and overseas, however small, are all declared on your tax return.
9. Remember that you have to declare all your sources of income on your tax return, even where a source is making a loss (e.g: a let property). This applies even if you are continuously making losses from these transactions.
10. Make sure you only claim business expenses that are 100% wholly and exclusively for the purposes of the business and exclude all personal expenses.
11. Where you are claiming mileage allowance for Company business, make sure you keep a log of the mileage undertaken for the business journey.
12. If you receive a dividend from your Company, make sure you complete the necessary paperwork for the dividend vouchers etc., to avoid these being reclassified as remuneration or loans.
13. From 06 April 2021, Vat returns have to be filed without breaking the digital link from the source data to the Vat Returns.
Ensure that this is done accordingly to avoid any fines.
14. When taking on a new employee, do complete the starter checklist or P45 details to get the correct level of allowances against their wages.
15. Queries from the Tax man should be in writing for you or your accountant to consider, as any estimated answer can be costly.
16. The Tax man does make mistakes. If you are accused of underpaying tax, make sure your accountant check the calculations before agreeing any payment.
The information in this publication is by no means exhaustive and is of a general nature for guidance purposes only and as such, we strongly recommend that you obtain professional advice and consult the latest legislation relating to your specific circumstances before taking any action.
We do not provide any warranty that the information is reliable, complete and up to date. As such professional advice must be taken before acting or refraining from acting on any of the above.
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