About Tax Investigations
If you are self-employed you are required to submit
accounts to the Inland Revenue together with income tax and capital allowances
computations each year as part of your SAT Return
If you have
engaged our services this will be done for you but be aware that it is
essential for you to keep basic books, recording all income and
expenses. See our separate page on this subject. Most of the time though
your return will not be examined in detail by the Tax Inspector but
will be accepted.
There will be
points that the Tax Inspector will be looking for when he examines your
accounts, some of these are listed below and include...
Insufficient own drawings from the business to meet private expenses
such as housekeeping, mortgage, private hire purchase, clothing,
smoking, drinks, entertainment and holidays.
You have some form of income that has not been included in your annual
Tax Return, or the interest shown on your Return indicates a higher rate
of savings than would seem likely from your drawings from the business
The accounts do not include adjustments for the private usage of motor vehicles,
telephones, or own accommodation, etc.
Business economics review - a comparison with similar businesses is
You have not kept a full record of drawings from your business.
Monies paid into private bank or building society accounts do not tie up
with your drawings from the business.
You issue invoices to customers and a number of invoices have been
cancelled and all of the copies have not been kept by you. Here the
Revenue take the line that the taxpayer was probably paid in cash and
has destroyed the evidence.
The Inland Revenue have received a letter or a telephone call from a
member of the public.
You had a new source of income which had not been notified to the Inland
Revenue within the time limit set out in the Taxes Act.
You had monies not necessarily taxable such as a win on the lottery or
football pools but this enabled you to live on less than the normal
amount of drawings but the Tax Office were not aware of this.
You are chosen for random audit under the new system.
If any of the
points above alert the Tax Inspector to have a closer look at your
accounts or you are in a business that has been specifically targeted
for investigation, the Tax Inspector will ask to see YOUR basic records
from which YOUR books have been prepared together with YOUR books that
you produced to your Accountant to enable the accounts to be completed.
This tells the
Inspector whether you wrote up your books at frequent intervals or in
one go some time after the end of the year. He also wants to see whether
your records are complete. All entries made with one pen might indicate
that you wrote your books up from one sitting thus casting doubts on
If the Inspector
is satisfied after looking at YOUR books enquiry will end.
If the Tax
Inspector is not satisfied you will be asked many questions.
Usually this means
that the Inspector will ask you and your Accountant to attend an
interview at the Tax office where the Inspector will ask questions about...
your private expenses
the records that you keep
If you cannot
satisfy the Inspector the Inland Revenue may demand additional tax plus
interest and penalties.
WHAT CAN YOU DO TO
The answer lies
first and foremost in the standard of the books, which you keep, and
secondly as a safeguard whether or not your Accountant carries out a
full check of your books.
of a full check are explained with our
As far as
book-keeping is concerned if you follow our recommendations and keep
honest and complete records you should have no problems that we as your
Accountants cannot resolve.
We settled a tax
investigation where the client did not have complete records
written up on a daily basis, which resulted in over £3,000 extra, tax
and penalties being paid.
The initial tax
demand was for over £20,000 and it was only after prolonged
negotiations with the Tax Inspector that the figure was reduced.
Had full records
been written up regularly we feel sure that we could have agreed that no
additional tax was payable. In another case full records of takings and
expenses were kept but unknown to us the client paid moneys into a
private bank account which did not tie up with his drawings from the
business. In the absence of an explanation as to where the moneys came
from he had to pay additional tax and penalties on these credits.
If you are
investigated your basic records will be requested by the Income Tax
Inspector including diaries and note books like that suggested above.
records the Tax Inspector will view your business records with some
See our advice
about book-keeping. Remember if you keep accurate books and use our Gold
service we will not charge you for the time we spend dealing with
enquiries raised by the Inland Revenue provided that those enquiries do
not show that you have omitted income from your records.
Is it possible to alter a mirrored will? Mirror wills, for example, are those made by a husband and wife on the same date and in the exact same format. The will of the survivor cannot be changed after the death of the first to die if the two wills are mirrors. Bracknell Will Writers