Good morning and welcome to our latest post. With the cost of living crises and increases in taxes, the SME sector is again taking brunt. After the effects of covid 19, and the loss of overseas workers, small business owners may well be asking themselves when we'll turn a corner, or even why am I bothering? In such circumstances, with increases in NI and tax bands and allowances being frozen, it may well be tempting to think putting more expenses through the accounts will help alleviate matters and even be morally justified.
There are several issues to keep in mind.
1) Although HMRC don't check every return, when they do, if they find wrongdoing they may go back 6 years. If they suspect fraud they can go back 10 years. Even if you've only taken extra expenses in the last year, it will be a huge inconvenience and could be very costly to have to defend 6-10 years of tax returns.
2) HMRC, now more than ever will be trying to claw back a large chunk of unpaid tax in order to offset some of the Covid handouts. Indeed between 2016 and 2021 the HMRC's Fraud Investigation Service took back £1 Billion from offenders. https://www.gov.uk/government/news/hmrc-fraud-squad-takes-back-1-billion-from-offenders. HMRC have been given millions of pounds more to tackle tax fraud. Recently an extra £600 Million was given just to tackle benefit fraud alone.
3) Whilst it is perfectly acceptable to claim back tax on legitimate expenses, it's not ok to claim for things that aren't a genuine business expense. It's also unnecessary too. There are legitimate ways you can look to reduce your tax bills. Firstly, are you claiming all the expenses you could be? for example, do you keep a mileage log? do you keep all your parking stubs for business trips? Are you paying into a pension and if so could you pay in more? If you'd like to ensure that you are claiming all you should be, call to arrange a meeting with us.