Common Tax Myths : Part 1
Updated: Nov 11, 2020
Navigating the world of tax and accountancy when it isn’t your 9-5 can be a confusing experience. In fact, there are many tax myths that have grown out of this uncertainty. As an accountant, I am regularly blown away by the variety of misconceptions out there about tax and HMRC. Knowing your tax myths from the truth can help you avoid costly mistakes.
So what is reality when it comes to these rumours? In this blog we’re setting the record straight on some of the most common misconceptions we have discovered here in the UK.
1. HMRC will never find out that I haven’t paid tax
It is not uncommon when discussing tax for people to comment that they did not know that a particular transaction was taxable, and then to ask: ‘How would HMRC ever know that the transaction had taken place in any case?’ Oh, hope springs eternal.
The reality, of course, is very different. Earnings and transactions can come to HMRC’s attention in a number of ways, many of which require professional advisors to make reports, such as:
The transfer of legal title
Web trading sites such as ebay, Gumtree, Amazon, etc.
Import and export records held by Customs
Computer and mobile telephone records
Anti-money laundering reporting legislation
Information received from third parties
Lifestyle information such as purchases of cars, clothing, holidays which may build up a picture about a person and be compared to their declared income
The UK tax legislation places the onus upon all UK taxpayers to notify HMRC of any transactions that give rise to a tax liability and HMRC has teams of investigators who do nothing else but examine the above (and more besides).
2. You won’t be fined for filling a return late if you don’t owe any tax.
Sadly, this one is not the case. If you are required to file a return, you can be penalised to the tune of £100 if you miss the January 31 deadline (October 31 for paper returns) even if it turns out you don’t owe HM Revenue & Customs a penny.
3. Anyone who is investigated by HMRC is up to no good.
HMRC looks into all sorts of things, all of the time. Enquiries and investigations often result in...absolutely nothing. Yes, it is in fact very common for HMRC to walk away from an enquiry without needing to amend tax returns or to assess more tax.
4. I can’t register for VAT as my turnover is below the threshold.
You can generally voluntarily register for VAT even if you are under the threshold. This can be particularly advantageous if most of your customer base are VAT registered themselves.
5. All accountants are qualified and experienced.
In reality, anyone can set themselves up and use the title Accountant as it is not protected like some titles. To avoid getting caught out, ensure anyone you use has the right experience and qualifications. BCT Accountants are a member of the Chartered Institute of Accountants in England and Wales and staff also have additional qualifications as both Chartered Accountants and Chartered Tax Advisors.
So, there are our first 5 myths debunked. We could go on as there are so many misconceptions about tax and accountancy that we dig up. Keep your eyes out for a second blog post with more myths as we continue setting the facts straight.
If you feel your business would benefit from focused financial guidance and advice, please do get in touch with Catherine on 01423 431889 or email her at email@example.com for your FREE initial one-hour consultation.