Record keeping and HMRC communication

SMEs should be prepared for HM Revenue and Customs (HMRC) to become more aggressive in following up on late payment and tax avoidance.

MPs criticised HMRC this month after it emerged that the difference between the amount it should collect and its actual collection total had increased by £1 billion (from £33bn to £34bn) in the year to April 2013.

The tax gap is also forecast to increase by a further £3bn for the year to 2014.

The House of Commons’ Public Accounts Committee has also criticised HMRC for not doing enough, quickly enough in tackling tax avoidance schemes.

SMEs are arguably easy targets when HMRC is coming under pressure so they would be wise to ensure that their records are all in order and payments up to date.

It is important to keep copies of all filings and communications with HMRC, preferably confirming phone calls in writing and to not ignore any communications from them.

If you are unable to pay a liability, they are helpful and providing you are proactive they will agree payment terms. If you do agree payment terms then stick to them otherwise they won’t believe any other undertakings you give so make sure your cash flow forecasts are realistic.

Independent of making any payments, make sure your various tax returns (VAT, RTI -PAYE and corporation tax) are submitted on time to avoid automatic penalties.

If it is all becoming too much, remember tax is one area where early help from a professional can be invaluable.

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