Common Tax Errors that Causes a Tax Audit
About millions of people have a fear of getting notifications by HM Revenue & Customs (HMRC) every year. The fear can be solely of getting any penalties from HMRC which can be due to the tax errors in their side.
Tax errors can be due to various reasons. Be it a lack of organisation, knowledge or carelessness, each of things contributes to tax errors.
Take a look at some common errors that will give an auditor a solid ground to track you down.
Overstating the amount of office expenses
As tempting it might sound to exaggerate your office expenses, don’t do it. The amount you spent on items like computers, printers, photocopying equipment, and other office supplies must be exactly reported. If you do make the mistake of overstating business spending, you can be considered as a tax evader by HMRC and auditing will be on its way along with a penalty.
Failing to report rental income
Again, as much as tempted it is not to report a rental income, doing so is not the right thing to do. And, if you think renting out income property will not be noticed by HMRC, you are DEAD WRONG. It is because the agents of HMRC proactively researches online sites and newspapers to determine who are liable to report income from rental properties.
Failing to report eBay sales or other sales activity
HMRC knows about selling activity especially that place online and consider this form of activity to be of trading venture. Thus, if you are into eBay sales or any other online selling activity, you should declare this type of income to HMRC. If you don’t, be prepared to be hunt down by them any time soon.
Using a wrong tax code
Tax code determines the amount of tax that needs to be deducted from an income. Sometimes, people deliberately give a wrong tax code
for the sake of reducing their tax bill. However, this practice should be strictly avoided as a wrong tax code can easily put you on a target list of HMRC’s auditors. So, be sure about your tax code and enter the right code properly.
Exaggerating your donations
With the intention of reclaiming a greater tax rate on gifts, many people are likely to exaggerate their donations in the 'gift aid payments' section. Make sure you avoid making such mistake and enter the actual amounts you gave away as donation when filling in the gift aid section. Trust me; this will help you to be away from HMRC’s eye.
When doing taxes, errors can be made sometimes. In case if you do make, be honest and report to HMRC and make improvement because you obviously will not want to see the wrath of HMRC.
If you want any assistance regarding any tax issues, you can contact us 020 7060 9556 to talk to one of our tax consultants.