Businesses can make tax mistakes much easier than you realise, but why is it so simple for mistakes to be made? They could cost your business a lot of money and you should always prioritise avoiding any tax errors with accurate tax return.
Although you may not enjoy paying tax, it is essential for your business to contribute in your tax return. Avoiding mistakes will save you money, something Coleman & Co can provide advice and assistance for.
Generating Tax Debt
Tax return must be filed on time, every time. Although initial warnings may seem like a let off, continuing to make errors and lateness’s when submitting your tax return could result in big penalties which over time, generate a huge debt. Filing your tax return just 1 day after the tax deadline will result in an immediate £100 fine. If this happens three times in a row, fines will be increased to £500.
It is easy for your business to become complacent when making a good profit, but failure to organise your taxes will result in hefty fines. Although some penalties will allow appeals, if tax returns come in six months late or longer, no appeal will be allowed. This will also result in the HMRC estimating corporation tax, which you must pay as a penalty.
Never Borrow From Payroll
Some business may not know, and others might do it anyway, but you should never borrow taxes from payroll. Paying your business tax using employee’s payroll is against the law and means employees would not pay their fair share of personal income tax that goes to the government.
By borrowing from payroll, you are completing your own business tax with the money taken away from staff members as tax. When filing tax returns, every business must have their own separate taxes to pay based on income, in addition to staff payments. These two can never be combined so the business pays less money overall.
As well as being against the law, staff members will not thank you for taking taxes they have paid. Make sure the taxes you submit are correct for what the business has earned in the previous tax year.
Accurate Bookkeeping For Tax Return
Every transaction needs to be accounted for when calculating your tax returns. There is no income that you can not monitor as your overall revenue will always affect the amount of tax you eventually pay to the HMRC. By having every financial transaction stored manually or in the accounting tax software makes it easier to calculate your final tax returns.
By having this data available, you will avoid paying too much money on taxes or being fined for paying too little. Tax records should be kept for 22 months after the deadline they are used for. This means if the HMRC ever need more evidence of accurate tax returns, you have the information to back up any returns through effective bookkeeping and tracking all cash flow.
Monitoring Your Cash Flow
In addition to recording all transactions, you should regularly monitor your cash flow to spot any unexpected costs or revenue. You never know what could make a big impact on your tax returns and if there are ongoing costs within your business that you don’t know about, it could make a big difference to submitting a correct or incorrect tax return.
You need to know what income will have to be taxed and what can be left. If you constantly in take unexpected payments, more money will have to be taxed and these payments will always need to be considered. Monitoring your cash flow is vital to avoid any errors and ensure the correct amount of money is taxed in your business.
Every business should have the best possible knowledge of tax laws. Submitting tax returns on time and accurately will save you money over time and something Coleman & Co can always assist in. You can always use our advice or outsource your tax needs to our team. Contact our team today on 028 9266 3599 for accountancy advice in Lisburn.