Tax fraud is a serious offense that can result in hefty fines and even criminal charges.
With the ever-changing landscape of tax laws and regulations, it's important to stay informed and proactive in adhering to all tax requirements.
In this article, we will discuss the basics of UK taxation and provide tips on how to avoid tax fraud.
Tax fraud is the act of deliberately falsifying information or omitting details on tax returns in order to reduce tax liability or claim credits that a business is not entitled to. This can include underreporting income, inflating expenses, or claiming deductions that are not legitimate.
Here are five (5) things you need to do to avoid fraud in your company:
As if the bore that comes with sorting out the necessary files and records required for corporate tax was not enough, His Majesty’s Revenue and Customs’ (HMRC) recent crackdowns on tax fraud and avoidance add a dimension of anxiety on top of the whole process.
Consulting with a knowledgeable accountant for your tax yearly can help you choose the right structure for your business and avoid potential pitfalls in the long run.
Whether you're a sole tradership, partnership, or limited company, how you operate affects the kind of tax and national insurance contributions your business needs to pay. Each structure has its own requirements, concerns, and advantages.
For example, limited companies need to post profit before releasing dividends. Some sole traders who run their businesses from home can claim tax relief if the HMRC deems it reasonable. Corporate taxes in the UK might apply differently depending on your company’s structure.
Proper record keeping is key to preventing tax fraud. Hence, the HMRC expects companies to keep all their bills and receipts for at least six years. Therefore, you should properly store your records in a secure location.
Cloud accounting systems are worth looking into, as they have features that make it easier for you and your accountant to stay on top of everything. Even if you have a cloud accounting system, it might still be wise to keep physical copies of your records to ensure that you have all the necessary documentation in case of an audit.
Meeting tax deadlines is essential to avoiding fraud accusations. Make sure to submit all required paperwork accurately and on time and stay organized by creating a checklist of the requirements. With the help of your accountant, you can stay on track and ensure that everything is submitted correctly and promptly.
Tax laws are constantly changing, so it’s crucial to stay updated on the latest developments. Attend seminars, workshops, or webinars on tax topics to stay informed and make informed decisions for your business. The more you know about tax laws, the better equipped you’ll be to prevent fraud.
Collaborating with tax professionals can provide valuable insights and guidance on tax compliance. Keep an open line of communication with your accountant and address any uncertainties or changes in tax laws promptly. Ultimately, it is your responsibility to stay informed and compliant with tax regulations.
Avoiding tax fraud requires diligence and a commitment to compliance. By following these essential tips and working closely with tax professionals, you can ensure your business remains compliant and avoids any potential legal issues related to tax fraud. Stay proactive, stay informed, and stay compliant to safeguard your company’s financial interests.
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This article was first published on 27 May 2015 and updated on 20 May 2024. Edited by: Angelica Garcia