You must notify the Inland Revenue (£100 penalty if not done within 3 months of commencing to trade: form CWF1 which asks for some basic information.) You must start keeping complete records of all your business income and expenditure so we (you and I) can work out your taxable profit at the end of the accounting period. You must keep all records for six years. For more details visit the Revenue website Starting up in Business pages and the form CWF1.
All VAT regulations are complex, but in broad terms you must register when your turnover exceeds £85,000 pa (as we write). The difficulty arises if you exceed the limit without registering promptly. HMRC will go back and claim 20% VAT plus raise a penalty. See the HMRC website here.
I will normally need bank statements covering the whole period, plus details of business income and business expenditure.
The Revenue keep a sharp eye on businesses that tend to like cash deals: the motor trade, antiques, take-aways and market traders are the obvious ones. They also know what margins all trades enjoy so if they should ever do an investigation and your figures do not benchmark with the known norm, then you may be taken to the cleaners. Best not too I think.
A number of reasons. Maybe your paperwork is always on time, you run a nice clean business, or you’re not engaged in a sector subject to query, ie the same businesses as those above. You are more likely to have frequent visits if: you’ve failed to submit VAT returns on time on a regular basis referrals from another VAT office that one of your suppliers is not dealing with VAT correctly abnormal trading patterns A sudden drop in the amount of tax being declared, or an unexpected claim for VAT, can also trigger an inspection. During the inspection your systems will be examined to establish the full scope of the VAT position. Advice will be given to tighten up and probably raise an assessment.