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Only you know how hard you have to work to make a profit or your own wages, so don’t you owe it to yourself to spend a little time protecting your hard earnings from the tax man? – especially as he has some new tricks up his sleeve.

So if you are self employed or the landlord of buy-to-let properties, the stark message for you is – get your tax affairs into order quickly or you could be working even harder for the benefit of the taxman.

Why Increase Fines on the Self Employed Now?

The answer is depressingly simple. We normal mortals, and long suffering self employed business people, are not the only people suffering from the economic downturn. The decline in business activity has resulted in falling tax revenues. And whilst we scratch our heads to find new sources of income, so does the tax man, armed with the advantage that he does not need to sell anything, just find new opportunities and implement them.

Your friendly tax man has noticed that one of the quickest ways to raise tax is not to spend a lot of time running expensive investigations, but rather to fine people as they realise that we may be more willing to pay fines than tax!.

So to increase net tax revenues they have hit on the simple two pronged approach – increase the level of fines charged and find new fines to add to their arsenal.

What Are the Fines?

Failing to Keep Good Records: £3,000 fine. You must keep good records. The HMRC now collect information from many different sources. If they make enquiries of you and you cannot answer it – the fine is £3,000.

Careless, Deliberate and Concealed Acts of Tax Avoidance – 30%, 70% or 100% fine on top of the tax owed. If you have a made a genuine mistake and can prove it, you have nothing to fear. However if you have not maintained good records, or concealed revenue or concealed tax liabilities, you can may be liable to pay 130%, 170% or 200% of what you owe.

Ignore Requests from the HMRC – fine £60 A DAY. This may sound a little like the old board game of monopoly but it’s true. The taxman may fine you £60 a day or £420 per week for not answering a query. For businesses working on a profit margin of say 50%, you need to take almost £1,000 per week, including VAT, to pay for a fine running over a single week.

How to Protect Yourself

The old fashioned way of keeping all your receipts in a shoe box and giving it to the account at the end of the year is not going to cut it anymore. So what can you do?

•    Employ a trained book keeper who can demonstrate tax experience.
•    Install your own system that will demonstrate to HMRC that you are taking all reasonable steps to keep good records.
•    Buy a computer tax programme recognised by HMRC as a suitable way of keeping records. Mr Tax CD is one such programme. It is based on the knowledge and experience of a former senior tax inspector. If your partner or even child helps you to use it to keep your records in order, then their cost is tax deductable.

 

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