Dostoyevsky might not have had taxation on his mind when he wrote his classic novel (although who knows?) but the title is an apt reminder that at this time of year you could be facing large penalties for not paying your taxes on time.
Have you paid your taxes yet?
Will it be a case of Crime and Punishment?
Dostoyevsky might not have had taxation on his mind when he wrote his classic novel (although who knows?) but the title is an apt reminder that at this time of year you could be facing large penalties for not paying your taxes on time. And, looming in the background, there’s the lesser-known but even scarier threat of a tax investigation by HMRC. Aargh!
But let’s start with the tax deadline: 31st January 2019. If you’re just one day late in paying the full amount you owe, the standard penalty is £100. Each additional day late will cost you another £10, up to a maximum fine of £1,000 for being up to three months late. And it doesn’t stop there – the fines keep piling up.
A taxing situation
But what about tax investigations? At any time, HMRC could descend upon you and go through your accounts with a fine toothcomb. For instance, they might suspect that your tax return is inaccurate or has mistakes. They might also be suspicious if the amount you earn varies considerably from year to year – something that can easily happen in showbusiness and related professions. Another reason could be if you omit to include some payments on your return.
Even in professions as unpredictable as acting or singing, HMRC has guidelines that show them roughly how much you’re likely to earn. Any large discrepancies could be noticed and could lead to an investigation. Finally, to make things even more difficult, HMRC will occasionally just check on people seemingly at random.
The investigation itself can be a harrowing experience. It might focus on one particular element of your return or could be a full investigation. The latter can last for over a year and could cost some £5,000 in accountancy fees alone – not to mention the headaches and time spent in trying to answer their questions.
So how can you minimise the likelihood of an investigation? Firstly, by using a qualified accountant, you’re much less likely to be investigated. And you’ll at least have someone helping you who understands your business. In addition, an accountant will ensure that your tax returns are filed on time and will prompt you to pay them on time. Doing this regularly means that you’re less likely to attract suspicion.
The other way in which an accountant can help is by offering you ‘fee protection’ insurance. This ensures that if there’s an investigation (and no-one can be totally immune), any professional costs will be covered: your accountant will be able to act on your behalf and can ensure that HMRC keeps to its remit during the investigation.
So, Happy New Year – and it’s not too late to make a resolution based on a paraphrase of a well-known saying: “An accountant today could keep the taxman away”!