Many people think that during the first few years of your business, a visit from the taxman (or woman) is highly unlikely.
However, some HMRC checks are entirely random and they can investigate you at any stage of your business. So, this really isn’t the attitude to have if you want to stay on the right side of them, as well as save yourself a lot of stress.
By being HMRC-ready from the start, you can get into good habits as your business grows and discover valuable insights into your finances.
Today, we’re taking a closer look at how you can keep your books tidy and HMRC happy.
Keep everything up to date.
It may go without saying, but by establishing a regular bookkeeping routine, you can save yourself a lot of worry and pick up on problems as they arise.
We’ve written a whole guide on how to create an effective bookkeeping system because we know how hard it can be to make the time as a small business owner.
Our key tips are to designate a set amount of time per week to keep track of your finances, and gather and file documents, invoices and receipts. Don’t put off sorting out your paperwork; the pile will only get higher as time goes on.
Meanwhile, digital accounting software like QuickBooks, FreeAgent and Xero helps you to organise everything in one, easily-accessible place. Most of them have mobile apps that you can use when you’re out and about to snap photos of receipts and expenses.
The Making Tax Digital scheme will eventually require all businesses to digitally-record their affairs. Whilst only VAT-registered companies need to be concerned with making the switch to digital for the moment, it’s good to get ahead of the game and become familiar with online tools.
Iron out mistakes and omissions.
Going hand-in-hand with regularly updating your books, you must also ensure they are as error-free as possible.
Don’t expect anomalies to magically disappear. Tackle them head on and speak with your accountant to see how to rectify them. HMRC frequently looks at a group of businesses within a specific sector, and can detect if your company activities fall outside of the usual parameters.
A combination of regular maintenance and the use of cloud-based platforms can empower you to pick up on errors as they occur.
Don’t be late.
Whilst HMRC can investigate even the most punctual, organised and compliant businesses, they are more likely to review you when you don’t meet their deadlines.
So, be sure that you are on top of your tax obligations and pay them when they want to be paid to keep them at bay.
Set up reminders in your calendar, highlight the date page in your diary or get your accountant to nudge you; whatever works best for you.
A final thought.
Ensuring you’re HMRC-ready isn’t all about pacifying the taxman. When you’re on top of your finances, you can reap so many benefits and get a real understanding of the ins and outs of your business. You can spot issues as they crop up, as well as opportunities for saving, making changes to your pricing structure or buying exciting new equipment.
In short, when HMRC is happy, your business is too.
If you’d like to know more about HMRC investigations and how you can be prepared, please contact us today.