Let me begin by asking you a question – how many of you pay taxes? If you are earning beyond a certain limit then you’re liable to pay tax. For example in India, if you’re earning more than 2.5 lakhs per year, then your income is taxable. In the USA, if a person is earning between $10,000 and $20,000, the tax rate which is imposed is 0.4%. Now ask yourself –are you paying tax on time or complying every rule or policy related with it? If yes, then you’re a responsible citizen of the country you live in. But what if you’re unable to follow proper rules pertaining to tax? Then you must know about what ‘Tax Compliance’ is. Yes guys, it is a process to which a taxpayer complies with the tax rules of their country. But how do you do so?
Just use this guide to sharpen your knowledge about tax compliance.
Let me start from scratch now.
What exactly the concept of tax compliance is?
Simply put, tax compliance is the stage through which a taxpayer complies (or might not comply) with the tax rules of their country. For instance, by filing a tax return, declaring income, and paying the tax due in a timely manner. Also, it will either relate to personal tax or corporate tax.
In fact, tax compliance in the UK are responsible for ensuring that the financial information a company or individual submits to HMRC (Her Majesty’s Revenue and Customs) is accurate, proper, and adhere to the tax compliance obligation.
The truth is – people fail to maintain tax compliance due to the constant changes made in it. What should you do if as a business you face changes in tax compliance? If you see any systematic changes in tax compliance then how will you address it? Below I am going to enlist some points that will help you tackle tax compliance.
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Address the tax compliance changes with the following points
# Check requirements
The first point you need to follow to address changes in tax compliance is to check the requirements. Without checking the regular update on how in-scope legal requirements change, you will have no idea about tax compliance.
No doubt, laws are complicated to understand, right. And you will find that advisors are quick to explain possible interpretations. However, most refrain themselves from taking responsibility for deciding which way to go in real-life process.
# Rearrange your systems and processes
Next point you need to focus here is whether you run your own technology or have outsourced process to a third party, if you have decided the most appropriate interpretation of a new legal requirements. Then you have the change management resources and processes to make the necessary changes in time.
# Test to see whether it works
After rearranging the system and processes, you now need to test it to check whether it runs properly or not. You must know that having a compliant process is necessary but might not be sufficient. You also need to prove such compliance for a longer time as well.
Finally, you need to audit the compliance. If you are not running the systems and processes by on your own, you must be looking into the appropriate audit or assurance frameworks that you want from third-party vendor.
Now move little forward and talk about the responsibilities of tax compliance manager below.
Key responsibilities of a tax compliance manager
- Helps in preparing annual tax returns and supports financial statements on behalf a client or company.
- Identifies and mitigate risk for both personal and corporate clients.
- Review tax returns on behalf of a personal client or company.
- Collaborate with tax authorities on behalf of clients to resolve any query or issue arising in relation to tax returns.
- Link up with internal and external advisors to ensure all tax submissions specifically reflect all transactions within tax reporting.
The bottom line
Finally, you have come to the concluding part of this article which says that tax compliance is crucial for your business to adhere to. What if you don’t comply with tax? Generally, if you fail to comply with tax rules, it will impose financial penalties as well as a risk threatening to business that can damage the taxpayer’s reputation with the authorities and public. Now that you know how crucial tax compliance is for your business, make sure you pay tax on time and follow all the rules pertaining to it.