Starting a new business? Make sure you stay on the right side of the tax man!

But the good news is that if you want to avoid the wrath of “the taxman” – or, to give the full name, HM Revenue & Customs (HMRC for short) – there are a number of things you can do to keep your business in check.

Emily Coltman FCA, Chief Accountant to FreeAgent – which provides the UK’s market-leading online accounting system specifically-designed for small businesses and freelancers – offers her five top tips for staying on the right side of HMRC when you’re starting a new business.

Register at the right time

When you start a new business, or take on your first employee, or have to start charging VAT, you’ll have to register to do this with HMRC.

The easiest way to do that is usually online.

Be careful what you claim

When you’re recording costs in your business accounts, you can claim tax relief on most of them – but not all.

For example, if you take a client out for lunch, that cost isn’t allowable for tax relief, so you need to record it in your accounts as business entertaining, and make sure that when you’re working out your profit to pay tax on, you start with the profit figure from your accounts and add back the cost of the lunch.

File on time

Most tax forms now have to be filed with HMRC online. You can usually register to do this at the same time as you register for the tax.

Sometimes, you can file a form on paper as an alternative, but then it may have to be in earlier.

For example, the self assessment tax return, which all business owners must fill in, has to be in by 31st October if it’s completed on paper, but if it’s filed online, you have an extra three months – 31st January is the deadline in that case.

If you’re a FreeAgent user and you’re a sole trader or the director of a limited company, you can also file your Self Assessment tax return directly from within FreeAgent, rather than having to go through HMRC online.

Late filing of forms often incurs penalties from HMRC. Don’t risk it – file online, file on time!

Pay on time

As well as forms being filed late, HMRC don’t like being paid late. They can charge interest and sometimes penalties too if tax is not paid on time, or if you don’t pay enough tax.

Make sure you pay the right amount of tax at the right time, and if you are having problems making payment, don’t wait until the bill is overdue – talk to HMRC.

You can run but you can’t hide

Don’t hope HMRC will go away if you don’t contact them. They won’t!

They do also have their ways of finding business owners who haven’t registered and aren’t paying the right amount of tax – for example, HMRC inspectors work with sites such as eBay to find unregistered traders.

If you deliberately hide tax from HMRC, they will charge you increased penalties if they do catch you out – so don’t risk it. Play by the book!

And remember, if you’re not sure about anything related to tax, such as when to register or which taxes you might be subject to, speak to your accountant. It’s far better to seek help if you’re not 100% clear about something, rather than risk making a mistake and being fined by the taxman!

Emily Coltman FCA is Chief Accountant to FreeAgent, which provides the UK’s market-leading online accounting system specifically-designed to meet the needs of small businesses and freelancers. Try it for free at