Guest post by Jonathan Amponsah CTA FCCA, Easy Tax Returns
If you a rushing to meet the 31st January deadline to file your tax, then be aware of these 11 most common mistakes:
1) Not using the white space to explain unusual variations
If you know there is something unusual, explain it. HMRC is then far less likely to start an enquiry.
2) Entering the same expenses in different boxes each year
For example, a driving instructor putting their fuel cost in the cost of sales figure one year and then in motor expenses the next, will produce large variations that the computer will want further explanations for.
3) Failing to declare or forgetting to include all sources of income
Remember HMRC knows if you have an interest earning account or perhaps an offshore bank account. So they will be asking; “Is this where you have filtered away undeclared profits?” This will trigger an investigation.
4) Using estimates and round sum figures on the return
This will fuel the taxman’s suspicion that you do not keep proper records and this will be used as a basis to ask for evidence to substantiate the amounts on the return.
5) Detailing information on separate schedules or writing “as per accounts” and/or “information to follow”
You might think the taxman already knows and can look it up, but that’s not the way the tax calculation programme works. You simply have to supply the info in the boxes as requires.
6) Lack of attention to risk areas and hot spots
There are certain expenditure areas that HMRC tends to query more often than others. For instance, where drawings are comparatively low, HMRC may wonder whether there have been undeclared cash sales which have been used to fund your living expenses.
7) Not showing private use adjustments separately on the self employment pages
HMRC will always be looking to disallow any private use of items. For example, where you have already restricted motor expenses for private use, you will avoid questions if you show the adjustments separately rather than netting it off. Make it clear that the adjustments have been made.
8) Not arranging time to pay
If you need time to pay – pluck up courage and call HMRC. They can be understanding. Yes, there will be some interest added but this is much better that incurring more penalties.
9) Claiming for expenses that cannot be claimed
The rules on what expenses can/cannot be claimed is not as straight forward as you may think. Expenses must meet the so called “wholly and exclusively for the purpose of trade” test.
10) Failing to do a quick reasonableness check
If your final tax is a lot more or a lot less than you expected, then this is a sign that something may have been entered incorrectly. Unless you’re able to put a finger on the reason why, you need to go back and double check.
11) Not seeking help
HMR campaigns tell us that “tax doesn’t have to be taxing…” However, the task of completing your taxes cannot always be considered straightforward. And if you get it wrong it can lead to an unfriendly letter from HMRC. My advice is to seek help if you’re unsure.
You can certainly do it yourself and use HMRC’s site or other online platforms. Or you take your records to an accountant, post them, or tap an app and go by using an app like Easy Tax Returns where you can handover your tax return to a tax pro and remove the risk of tax penalties.
ABOUT THE AUTHOR
Jonathan Amponsah CTA FCCA is an award winning chartered tax adviser and accountant who has advised many clients over the last decade on tax and has successfully defended clients against HMRC at the tax tribunal. Jonathan is the founder and CEO of The Tax Guys. He is also the co-founder of Easy Tax Returns (a tax return app to help tax payers avoid stress, penalties and find their peace). www.easytaxreturns.online. For more information see:
Twitter: @easytaxreturns #easytaxreturns