Sometimes running a small business can feel like spinning plates, especially if you're responsible for many different areas. It's therefore not surprising that filing your tax return through your tax accountant is often left to the last minute. This is not a good strategy as it can leave you open to fines for late payment if you have to amend the return or provide additional documentation that was missing with your first submission.
Here are some simple tips to help you keep on top of things and keep the tax man smiling.
File your tax return on time
It's really important that you file your tax, VAT and PAYE returns accurately and on time. If your tax returns are late, the Revenue guys could well select your business for a tax audit, and you will also incur interest and other charges.
If you update your records regularly, it makes it much easier to file your tax returns on time. By getting into this routine, you'll also be able to pick up errors or omissions at a much earlier stage.
Record all bank lodgments
The Revenue Inspectors will pay close attention to any bank payments and lodgments so make sure that you record them accurately. Any payments of a personal nature will be classified as 'directors' loans' if the business is a company or 'drawings' if you are a sole trader.
If you record all payments and lodgments regularly, you are more likely to spot errors or discrepancies as the information will be fresh in your mind. When you delay updating these records, you're more prone to error and inaccuracy due to forgetfulness.
Clearly identify all remuneration to employees
A small business sometimes classifies the payment of staff members' personal outlay as business expenditure rather than salary; for example, the payment of an employee's fuel expenses.
This can be an expensive error if it's spotted during a tax audit or PAYE inspection. The Revenue inspectors take all such payments for the tax year in question and gross up the account using universal social charge and marginal tax rates. Payroll taxes are then calculated and interest and penalties added to the tax due.
Tax rules can be very confusing if you're new to running your own business, but it's your responsibility to make sure that you abide by them. If you are uncertain as to what you need to do, always invest in the services of a professional business tax accountant.