It has been a trope seen on TV and in film many times; it is tax season, and someone has messed up their return, resulting in either an audit or them being made into a spy for the government. The latter is not as common, honestly!
But, committing tax fraud is not only related to making inaccurate claims on your return. There are many ways you can inadvertently get the attention of HMRC when submitting your tax return, especially if you are registered as self-employed or a sole trader.
So, with the help of a fraud solicitor, this article seeks to explain the best ways you can avoid being penalised for fraud.
You are required to report all of your income, including any money you earn from employment, self-employment, rental income, and investments. Even if you have earned £5 from a project from last spring, it will need to be reported to HMRC in your tax returns.
Failure to report all of your income is considered tax fraud, and statistically, it is getting easier to spot for HMRC since many tax returns will now require you to submit digitised unedited bank statements.
Keep good records
Make sure you keep accurate records of your income and expenses; this will make it simpler for you to report your income accurately and claim any deductions or credits you are entitled to.
There are many ways you can do this. There are now smartphone apps that can aid in keeping the books that can be used when making a tax return, making keeping track of your receipts as easy as taking a photo. If you have the money, it could also be worth hiring an accountant to keep your books for you, as they will then be able to make the tax return on your behalf.
Do not overstate your deductions
It is important to claim only the deductions and tax credits that you are entitled to. Overstating your deductions is considered tax fraud. If you are unsure which tax credits you can claim back or what a business expense is, contact HMRC for help.
Do not avoid paying taxes
No one who is a sole trader or self-employed wants to pay taxes or even submit their tax returns, as it is stressful!
But, if you owe taxes, make sure you pay them on time; deliberately avoiding paying taxes is considered tax fraud. If you are unable to pay the amount of tax you owe in full, contact HMRC to arrange a payment plan.
Seek professional help
If you are unsure about your tax obligations or have complex tax affairs, consider seeking the advice of a professional tax advisor or accountant; they can help you ensure that you are complying with tax laws and avoid tax fraud.
And, as mentioned earlier, if your business has suddenly become more complicated due to expansion or you have had to hire more staff, this can be the best time to hire some specialised help for your taxes.