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Start 2017 the Right Way – Make the Most of Your Tax Return

They say that January is a month where people are feeling at their gloomiest, and the need to complete a tax return is hardly the light relief anyone is looking for to lift their spirits. But the failure to comply can be far worse for small businesses that haven’t got their finances in order for the tax year, with potentially hefty penalties taken out of the company and straight into the coffers of HMRC.

According to new research conducted this month by Informi, a quarter of small business owners admit that they have previously failed to make the 31 January deadline to submit their online tax returns. This failure will have triggered an automatic £100 penalty from the government, with future, more punitive penalties to follow. HMRC takes a further £10 per day on returns greater than three months late, and a further £300 penalty (or 5% of the tax due, whichever is greater) on being six months late and again after a year.

Perhaps more concerning is that one in 14 small business owners we spoke to say they have not heeded their initial mistake, having missed the tax return deadline on more than one occasion. Although a £100 fine – for those companies who may have missed the deadline by a short time period – doesn’t sound like a lot, the fact is that it’s a complete waste of money given that businesses had ten months from the end of the 2015-16 tax year to sort out their returns.

And in any case, the average penalty that small business owners surveyed by Informi this month ended up paying for their lateness was £284.56. For one in seven small business owners, the eventual penalty exceeded £500, and for two per cent, it was more than £800. And remember this is just a fine for late submission – if there are mistakes in your return, further penalties may follow.

Luckily, there’s still time this year to get your form in and make sure it’s accurate. You’ll need to gather lots of information together – P60, P11D, P45, P2, capital gains information, trading income details among them – but help is readily at hand. Online resources are available, not least on this website (check out Jen Smith’s excellent three tips to make submitting your tax return a breeze), and if you really feel you need external help then consider hiring an accountant or bookkeeper – our handy search tool can help you find the nearest one in your area.

If you’ve never submitted a tax return before, don’t get too proud around asking for help, as you won’t be alone in struggling through the demands placed on you by HMRC. Our research has shown that 87% of small business owners sought advice when completing their tax returns, mainly from accountants and bookkeeppers followed by online resources such as Informi. Others seek advice from friends and family while some use resources provided by the government.

And getting your taxes all sorted now could lead to you finding your business maintains good working financial systems for the future. When Making Tax Digital comes in over the coming few years, your business will be well placed to cope with the increased demands on reporting financial figures, which will become a more regular feature for businesses of all sizes as the UK becomes one of the most digitally-advanced tax reporting systems in the world.

Getting your finances in order could free up more of your time to focus on the rest of your business and help it to grow. If you haven’t yet started your tax return, head straight to HMRC’s website.

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