Can HMRC investigate an earlier tax year?
HMRC is bound by a rigid timetable in which it can open an enquiry into your or your business’s tax returns. This is known as the “enquiry window”. If your return is submitted to HMRC:
on or before the normal deadline, it has up to twelve months from the date your return was submitted to start an enquiry. After the normal deadline, the enquiry window runs until the next quarter day (30 April, 31 July and so on) following the first anniversary of when you submitted your return. For example, if you submitted your 2016/17 return on 1 March 2018 (a month and a day late), the enquiry window ends on 30 April 2019.
If your business qualifies for the cash accounting scheme (CAS), it’s usually beneficial to use it. Its big advantage is that the trigger date for accounting for VAT on your sales, is when you get paid and not when you supply goods or services to your customers. So you’re not out of pocket (in terms of VAT) if a customer is a slow payer. Plus, you don’t have to deal with the tricky bad debt relief rules, which is all good news for your cash flow.