Some businesses find themselves in the unfortunate situation of having a surprisingly large terminal tax bill at the end of the financial year.
This comes when companies haven’t accurately accounted for their tax liability, and can leave their business in a difficult cash flow position.
If your business can’t meet its tax obligations, you may be hit with interest and possibly even late payment penalties. This can hurt your cash flow even more.
When you’re planning for the financial year ahead, take into consideration the following things that will impact your tax bill:
- Having a stronger financial year than you planned for
- Unpredictable or irregular income
- Not accounting for timing or permanent tax differences
- Not being aware of and update to date with tax rule changes
For example, last year, the Tax Department found that many companies weren’t accurately accounting for fringe benefit tax.
Of course, you can’t be expected to know exactly what’s happening in the tax world at all times. For that, you need a tax adviser.
The Tax Department is reviewing, auditing and investigating now more than ever. It’s important that you have the mindset of “when, not if” your company will be reviewed.
Common mistakes companies make include…
- Thinking that vehicles for work-related use are exempt from fringe benefit tax
- Applying the top fringe benefit tax rate across everything
- Using out-of-date fringe benefit tax rates
- The incorrect claiming of foreign tax credits
- Incorrectly returning foreign exchange movements as income or expenditure
- Not treating tax related to shareholder accounts correctly
- Incorrect treatment of goods/services awarded to employees
Your company should always be prepared for a review, as it can add up to thousands in legal and accounting fees, and impact your profitability. Consider shielding your company from the unbudgeted costs of a review by Inland Revenue (or any other government department) with some sort of accountancy insurance protection.
Talk to us about your options today.