Though there’s no specific and guaranteed way to fully avoid being tax audited, there are bad habits you can consciously look out for to avoid raising the brows of accounting agencies such as HMRC.
There’s virtually zero chance for any small company for its tax return to end up audited. But, for extra safety precaution, here are some techniques from accountants in west London to stay out of track heading straight to auditing troubles:
- Silence the Losses:
Reporting a net yearly loss is giving auditing firms the green light. Capturing attention applies especially to any small loss. Auditors will require you to take into account your total income, not your expenses. Having to keep out expenses here and there, which results in a small amount of annual profit, might save you from your business being classified as a hobby instead of an actual company.
- Organize your Expenses Accordingly:
You might stumble some expenses that you might’ve failed to categorize under a specific category. It is still best to put such entries under their category instead of vaguely subjecting them.
Giving auditing firms the impression that certain expenses you have might be some made-up non-existent fake entry will burn you down. Properly itemize and avoid mixing everything like travel and advertising under the same umbrella. Finding these two under the same category is a bright red flag and will put you under fire.
- Stick to Schedules:
Solidify your integrity by complying with all policies, submitting on time, and paying before deadlines.
- Repeated Numbers will Catch attention:
Rounding off entries is a bad practice. Make sure that the entries that you put are accurately true. Unless when the real entry just happened to look like a round-up. Expenses change and to repeatedly report the same figures year by year is highly suspicious.
- Avoid Massive Deductions:
This means never overestimate the effects of your deductions for travels, meals, or even donations. Such expenses along with unpaid debt, medical expenses, and casualty losses are thoroughly assessed. Any massive leap of deduction figures will be detected.
- Answer Everything that Needs Answering:
Truthfully fill out your tax form with accurate answers. Recheck that there are no questions left behind. Any mess on your tax form will seek the attention you’re trying to avoid.
- Deliver Any Further Details that Auditors Requests for:
Instead of presuming that the auditors will empathize with suspicious entries, provide all documents about the items which you believe might raise questions. Doing so will save you time and stress because the extra information auditors might ask for has already been completed.
- Make Sure All Documents Match:
Report discrepancies are mostly the basis for capturing attention. All bases have to match particularly, the arithmetic and forms given by the government.
Keep in mind that the possibility of being audited is almost none. In most cases, million-dollar individuals and companies are the ones that are highly likely to capture attention. Just remember the tips and tricks given by accountants in West London to avoid triggering auditor’s radars. Absorb these pieces of advice to save you from unbearable headaches.