Managing a business means meeting various requirements and expectations, from legal obligations to environmental responsibilities. One area that can often be especially challenging for many companies across the UK is business tax planning. In this easy guide, you can discover some frequent mistakes that businesses can make when it comes to tax, and how professional business tax accountants can easily save the day.
The Results of Tax Mistakes
Before getting into the thick of the potential tax pitfalls you might fall into, it can be helpful to understand the potential consequences businesses can make. Below, discover some of the key tax mistakes that businesses can fall prey to here.
Penalties
When your business misses a deadline or underpays the taxes, this can lead to automatic penalties issued by HM Revenue and Customs. You might find, for example, that interest is charged per day for any late payments. This can build quickly, putting a financial strain on your business. There may even be additional penalties for repeated late payments.
Stress and Operational Disruptions
Tax mistakes can be costly in more ways than one. Accidental mistakes when it comes to paying taxes can be incredibly stressful for a business. To deal with tax mistakes, often a business will require disruption to daily operations. This disruption can impact productivity, leading to delayed projects, reduced focus on customer service, and even potential revenue losses if key team members are pulled away from revenue-generating activities.
Tax Audits
If tax mistakes are often repeated, HM Revenue and Customs may increase the amount of tax audits that are carried out on your business. The ordered tax compliance checks may consist of an HMRC representative visiting your business and investigating your documentation.
Reputational Damage
As a business, it’s important to keep your reputation strong and respectable to attract the business of potential clients and form relationships with other businesses. Unfortunately, tax mistakes can be damaging to your business, dissuading others from wanting to connect with your business or to engage with you.
Legal Action
One of the most dreaded consequences of tax mistakes is legal action. Legal action is typically taken against a business as a result of tax evasion or other severe tax violations. The legal action taken can extend far and wide, with consequences such as court proceedings, additional fines, and even criminal charges. Additionally, this legal action will likely require extra funds to be spent.
The Key Pitfalls
To resist making tax mistakes, it’s important to familiarise yourself with key pitfalls that you can make. From inaccurate record-keeping to a lack of funds, there are various ways you may inadvertently make a mistake when it comes to paying your taxes. Read on to discover some of the key challenging situations you need to be aware of.
Inaccurate Record-Keeping
One of the easiest ways to fall into tax mistakes is through inaccurate record-keeping. Poor documentation and misplaced information can unfortunately lead to potential issues when it comes to HMRC audits and tax filings. To prevent this from happening, it’s essential that bookkeeping is taken seriously and carried out carefully at all times.
Overlooking Certain Business Expenses
In certain circumstances, you may be costing your business much more than you need to! Some expenses are entirely allowable, and not claiming these can result in higher tax payments. Allowable expenses are specific business-related costs that HMRC recognises as necessary for running your company. These expenses can therefore be deducted from your profits before tax is calculated. By not claiming these deductions, you may be missing a significant opportunity to save.
Not Setting Aside Funds
Similarly to managing rent payments and other bills, it’s important to set aside funds for paying taxes. As businesses are kept busy managing a variety of expenses, it can be surprisingly easy to forget to set aside funds. Failing to prepare can lead to serious cash flow consequences when tax deadlines arrive, unfortunately, meaning companies may need to divert funds from other important areas.
Mixing Finances
Getting personal and business funds mixed can heavily complicate tax filings. Keeping personal and business finances separate helps create a clear, organised record that simplifies tax filing and minimises the risk of costly errors or penalties. Furthermore, this separation can simplify bookkeeping processes, enabling business owners or accountants to record transactions more accurately.
Missing Deadlines
Deadlines, as with many different areas of business operations, must be adhered to when it comes to taxes. Unfortunately, it can often be surprisingly easy to pass a deadline without noticing it, particularly if you’re juggling multiple responsibilities across the business. As mentioned, missed deadlines can lead to immediate financial consequences, including late fees and interest penalties.
Not Consulting an Expert
While filing your taxes yourself may often seem preferable, it can be easy to make mistakes if you’re doing it alone. Tax laws can be complex, so without professional insight, you have a greater chance of overlooking important details. Professional business consultants can help by reviewing your taxes and making sure everything is submitted correctly and on time.
Your Local Accountants in London
Looking for a team you can trust to help you manage your taxes as a business? At Oasis Accountants, we take pride in helping our clients manage their tax payments, whether for businesses or individuals. Thanks to our years of experience, we are ready to tackle any challenges you might be experiencing with your taxes head-on, making sure you’re able to concentrate on the things that matter most.
How We Help Businesses
One of our most popular services here at Oasis Accountants is business accounting. We help companies to remain tax compliant and avoid any serious mistakes that can result in fines. Alongside this, we can help with business planning, payroll management and general bookkeeping, helping you to keep your company’s finances fully in order all year round. If you’re interested in our business accounting services and would like to discuss them further, our friendly team is just a phone call away.
Reach Out to Us
At Oasis Accountants, we’re here to help businesses and individuals to get their taxes right. Our website is filled with information about our services, so please visit it to find out more about us and what we do. Alternatively, if you’d like to organise a quote, please get in touch with us directly.
