Raw 04 - December 2008 - (Page 37)

TAX SORTED RAW assume that you are trying to hide something. If subsequently it is discovered that there is extra tax to pay, this could increase the level of penalties charged. Also, if you do not attend a meeting the Revenue may find grounds for calling a meeting of the Commissioners. At this meeting you or your representative may have to answer questions under cross examination which can be hugely stressful and costly. The problem with attending a meeting is that the inspector is trained in interview techniques. Leading questions can result in you opening yourself to an attack even where there is no problem. Warning 6 - The Tax Office has huge resources and powers Remember the Tax Office has wide ranging powers and almost unlimited resources. The Revenue can afford to invest time testing and analysing your records and asking lots of questions. The taxman will use the resources to their advantage in an attempt to grind people into submission - and to accept extra tax bills just to get the investigation closed down. The VAT Office even developed their own software called SPACE used to interrogate spreadsheets and find mistakes. This is now available for tax investigations. Warning 7 - Inspectors are on a bonus HM Revenue and Customs pay bonuses on tax collected from investigations and there are internal targets for gathering additional revenue. Click here to see an article in The Times about bonuses being paid to tax inspectors. http://business.timesonline.co.uk/ tol/business/law/corporate_law/article1288528. eceAmazingly a settlement (extra tax) is expected in 76% of investigations. This means three in four people will be paying additional tax and extra accountancy fees to defend the Revenue’s claims. The average Investigation lasts 18-months; results in a tax settlement of £3,000 and costs £3,000 in professional fees. Warning 8 - Information gathering and sharing The Tax Office and VAT Office have been combined and because they are now under one roof they can share information. Warning 9 – Business Economics Models One strategy used by the Taxman to try to gather in more tax revenue is to argue that the business profits are understated based on business economics models. The taxman compares your business to information they have about your industry or sector. The main attack is often based on gross profit margin comparisons. If your books are accurate and based on sound accounting principals you will have a better chance of defending against unrealistic comparisons based on a business economics model. Conversely if your books are inaccurate you will find it difficult to defend your case. Warning 10 – Interventions There is a “new game” in town, HMRC Interventions! The Revenue are trialling a new approach with their customers (taxpayers), the stated objectives being: • a review of current record keeping, to make sure they meet HMRC standards. • a short risk review. • self audit of tax returns, i.e. phone calls or letters requiring taxpayers to consider changes to their returns. Initial contact may be by letter or a telephone call. At the moment this is a trial so the Revenue have no powers to compel you - they can only do so with your agreement and co-operation. However, some people think that not co-operating can raise the interest of the Revenue! Like the standard investigation, without proper professional support, and without good underlying accounting records, this approach can quickly lead to a full blown investigation. Warning 11 – Higher targets The tax office wants to collect an extra 25% tax from investigations in 2008. With government finances under pressure maybe more resources will be put into this activity. What you can do to protect yourself? You can’t prevent a tax investigation starting but you can reduce your chances of being selected. For instance: • We believe that due to our reputation with the tax office you are less likely to be investigated. • Whilst completing your accounts we automatically carry out risk management checks to highlight areas of concern. If necessary we will discuss these with you. • We can recommend additional disclosure notes on tax returns to pre-empt questions. • We will manage your tax affairs and help you ensure your accounts and tax return is sent in on time. • We can help by providing free bookkeeping software and support to make sure your records are accurate. We can provide this for no charge as it saves time at the year end. • We can give you mid year or quarterly tax forecasts so you can budget for tax bills and make sure you are able to pay your tax on time. • We know the detailed rules and procedures of investigations and can help you if you are investigated. What are you going to do? You have three choices: • Do nothing and take the risk • Make good use of bookkeeping or accounting software • Take out some insurance and cover some of the risk We believe that if you do nothing, unless you are very lucky you will eventually fall foul of the investigation process, and your lack of good evidence in the form of accurate accounting records will prejudice your case. Bearing in mind what can go wrong and how easy it is to avoid the problem we obviously don’t think doing nothing is a good idea. We think the best choice for you is a combination of insurance and assurance supported by your accountant. • Insurance – professional fee insurance will cover the fees representing you. This means your accountant can argue on your behalf for as long as the taxman wants. • Assurance – producing good quality bookkeeping by using software will mean your accountant can argue and defend you aggressively. Keep in mind we are able to provide you with a specialist insurance and we have the capability to give you free bookkeeping software and support. And if you want we can even do your bookkeeping for you. To contact Shaun and see how you can reduce your chances of being investigated please email taxsorted@ googlemail.com or call 0800 634 4476 www.tax-sorted.biz millionimpossible.com 37 http://business.timesonline.co.uk/ http://www.tax-sorted.biz http://www.millionimpossible.com

Table of Contents Feed for the Digital Edition of Raw 04 - December 2008

Raw 04 - December 2008 Contents Imran Hakim Linda Klassen Brown Bradley Chapman Heidi Weir Colin Stroud Emma Thompson Raw Business Have a Care JPR Mortages TLB Events Alexander Davis

Raw 04 - December 2008

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