Small businesses are around three times more likely to face an audit than an individual.
Even the most law-abiding business owners get nervous when the Inland Revenue decides to conduct an audit on them. It takes a lot of time to prepare for an audit and you will likely need to work closely with your accountant so it won’t be cheap.
Avoid doing anything that will raise a red flag to the taxman. If you have a home office, consider skipping the deductions. Businesses are often subject to scrutiny if they claim on home office maintenance or utilities, especially if they also have another office elsewhere.
This may seem obvious, but make sure that you keep all your personal and business expenses completely separate. Have a bank account and credit card specifically for your business activity.
Don’t file a messy, handwritten tax return or make numerical errors. This will draw more attention to your returns than is necessary. You should always avoid estimating expenses or income because it won’t match up if a customer or supplier claims the exact amount. Plus, of course, the most important thing you should always do is pay your tax bill on time!