Have an advisor
Making sure you have someone who can advise you on your taxes, like an accountant or advisor, is key to helping you avoid a tax investigation. This is especially important If you’re unsure about managing your business’s taxes or handling tax-related issues.
You could appoint someone from a high-street brand or get help from a business association, like FSB’s Tax Investigation Protection services. Having experts to hand like this can spot the small details you might miss, which could trigger an investigation from HMRC.
Keep your records up to date
Another way to avoid an investigation is to ensure all your tax records and documentation is up to date. That way, if HMRC asks you to provide certain documents, you are equipped to give them what they need, which is less likely to cause them to investigate further.
It’s wise to keep both hard and electronic copies of things like invoices, receipts and mileage records, wage books and bank statements, as well as business documents like shareholder certificates.
When your circumstances change, you shouldn’t wait for when it’s time to do your tax return to inform HMRC. You should instead tell them right away.
For instance, you might have changed your address, or you might be self-employed and have been out of work for three months after suffering an injury. You could have also lost a major client suddenly, which has caused a huge drop in your revenue.
Anything like this might arouse suspicion and cause HMRC to investigate. But if you inform them as soon as your circumstances change, you can prevent this from happening.
Be on time
A key way to avoid a tax investigation is to file your tax returns on time. You should be aware of deadlines and ensure you stick to them when sending your information by post or online.
It’s also wise to think about giving yourself several extra working days for delivery times when posting your documents. Failing to get your returns to HMRC on time will result in a penalty and is likely to put you on the Government department’s radar for possible further investigation.
Be honest and open
Finally, it’s important to be open and honest with HMRC. You shouldn’t conceal information or tell half-truths, but instead, show you have nothing to hide. If there are inconsistencies in the figures you provide, such as a big change in turnover as a result of getting a succession of new clients, you should give details about why this is on your tax returns.
The more details you provide, the more information HMRC will have to help them answer any questions about your circumstances, which could otherwise cause them to investigate.