The modern business sphere is obsessed with transparency, and for good reason. Trading practices need to be fair and regulated across the board, and some offences hold greater consequences for businesses than others.
Inaccurate or inconsistent tax compliance can be incredibly harmful to the health of a company. Along with being grounds for penalties and fines from authorities, negative publicity is another major consequence.
Whether you’re new to tax compliance checks or you’re updating existing systems, it’s always worth knowing the risks of non-compliance. No matter how tedious it feels, ensuring full transparency is the only way to futureproof your company.
What happens if I fail to comply with tax regulations?
- You could face fines and penalties
Failing to submit an accurate and entire VAT return by the deadline could result in fines. If your company fails to account for its VAT commitments and is issued with a penalty charge, the sum will continue to grow until it is paid.
- You could harm your company’s reputation
If your competitors, suppliers or customers find out that your company is under investigation for reasons relating to non-compliance, their confidence could be entirely undermined.
- You could be subject to extended audits and inspections
Failure to comply could trigger an unavoidable and mandatory VAT inspection by HMRC. These forced inspections might be incredibly disruptive to daily operations and time-consuming for those involved. They might also reveal further non-compliance.
- You could lose employees
Once your team finds out that the tax matters haven’t been handled properly, they might start to lose faith in the way the company is run. You’d risk losing valuable talent and finding it much harder to attract new employees too.
- You could be banned from trading
E-commerce has become a dominant trading platform for many industries. As such, updated VAT rules set by policymakers have transformed certain online platforms, making them responsible for VAT collection. If you can’t provide valid information, you won’t trade.
- You might face criminal charges
In severe cases, the consequences of non-compliance could lead to imprisonment for those responsible or unlimited fines issued.
How could my company overcome the risks?
Overcoming the risks of tax non-compliance involves knowing how to navigate each requirement. Besides outsourcing your tax reporting processes to make them more reliable, you could leverage a VAT compliance and reporting tool to ensure accuracy for tax reporting, and cost-effective decisions for the business.
To overcome the potential risks of non-compliance, your business must:
- Register for VAT and obtain a valid VAT number whenever necessary
- Understand its VAT obligations applicable to each company it trades with
- File or automate VAT returns within the deadlines
- Make sure that any VAT recovery claims are entirely correct
- Comply with all regulations relating to the storage of VAT documents
With the correct protective and preventative measures in place, you can feel more confident that your business will continue to thrive in an ever-evolving and complex economy.