HMRC audits have caused sleepless nights for many accounts departments across the UK. Fortunately, this unpleasant scenario can be averted if you are well prepared for a tax compliance check on your business. Read on to find out more.
HMRC can conduct audits on any business at any time, which is why records need to be kept for 6 years. To help finance teams survive the stress, we’ve put together a few helpful tips to help you comply with HMRC’s guidelines.
Know the reasons for their visit
Many people feel like HMRC are trying to find fault when they make a visit to do an audit but this isn’t the case. There are many different reasons HMRC may want to conduct an audit, and the auditor will be simply making sure everything is in order. As well as investigations triggered by something (such as unusual activity compared to industry standard), they do also conduct random checks.
Ensure processes are organised
There are many different facets to an audit, but a key area is expense claims. HMRC will be particularly interested if there are unjustified expenses. Accurate and full record keeping is absolutely vital, so the best preparation is to be permanently prepared.
Clear and understandable processes
HMRC will not only audit receipts, but will also be looking at the bigger picture. If you do not have a clear process in place for expenses, it may appear as though you have something to hide and this will immediately trigger alarm bells. MyExpenses software offers complete transparency where staff expenses are concerned.
Correct documents and checks
HMRC will examine all relevant documents to ensure that they have been processed and recorded in the correct way. Having a digital expenses management solution in place will provide HMRC with not only an audit log, but the reassurance that you have taken all reasonable precautions to avoid fraudulent or inaccurate claims.
VAT and tax compliance checks
The ultimate goal of an audit, is to ensure that your company has accurately reported their finances and paid the correct amount of tax. Failure to keep accurate records could lead to underpayment and once an audit is complete, HMRC will demand any underpaid tax within 30 days and can add interest. If you know that expenses are being recorded and checked individually for VAT compliance, then you can be sure that your claim is correct. MyExpenses allows you to do just that. The finance team can check the VAT claim on each receipt is accurate before authorising, or if you would prefer we can offer a Receipt Validation service and do the checking for you. Extensive reporting options will also ensure P11D accuracy.
Areas of Concern
Particular areas of interest to HMRC are those which are by their nature, susceptible to fraud. Typically these are mileage claims and petty cash. Accurate records for these are even more important, which is why MyExpenses offers postcode to postcode mileage calculations and GPS locating, as well as an additional HMRC update service to make sure that your claims have the correct rates on them.
Keep your evidence
While we have established that HMRC stipulate you must keep records, it is worth mentioning at this point that digital copies of receipts are acceptable. If a receipt is photographed and added to an expense claim on MyExpenses, there is no requirement to keep the paper copy, thus saving you a considerable amount of storage space and time (both for you and HMRC) when checking claims against evidence.
Make life easier when it comes to expenses
Many organisations don’t have the time or money to employ a whole team of expense auditors, and for those who rely on finance teams to check claims, the time taken on each claim can be up to several hours.
Remember, digital expense management will not only save you time and money in daily expense processing, but also mean your company is permanently prepared, should an audit happen.