Business audits play a major role in the health of every company in the United Kingdom. They help confirm that financial records are correct, taxes are paid, and rules are followed. Yet many firms still make serious mistakes during audits. These errors can lead to fines, delays, loss of trust, and even legal action. In the UK, more than 5.7 million private businesses operate across different sectors.
Every year, thousands of these firms go through audits or tax checks. According to HM Revenue and Customs, over 280000 businesses were reviewed in 2024 for tax and compliance. Out of those, nearly 40 percent were found to have mistakes.
Are you sure your business is not at risk during an audit? This blog explains the most common audit mistakes in the UK, why they happen, and how your firm can avoid them.
Why business audits matter in the UK
Audits are used to check that companies report their income, costs, and taxes in a correct way. They also help make sure that firms follow company law and tax rules.
In the UK, companies must follow the Companies Act and tax laws set by HMRC. Large firms and many medium-sized firms must also submit full-audited accounts.
In 2024, UK companies paid over 828 billion pounds in tax. When records are wrong, the risk to the public budget is huge. This is why audits are taken so seriously.
A poor audit can lead to:
- Tax penalties
- Extra tax bills
- Legal risk
- Loss of trust from banks
- Damage to business value
1. Poor record keeping
One of the biggest causes of audit failure is poor records. Many small and medium firms do not keep full and clear records of sales, costs, payroll, and tax.
A survey by the Federation of Small Businesses found that 48 percent of small firms in the UK do not keep full digital records. Many still use paper files or simple sheets.
When records are missing, auditors cannot verify figures. This leads to delays and often deeper checks.
A real case from London in 2023 showed a retail firm that could not provide sales invoices for more than 15 percent of its turnover. HMRC later added 120000 pounds in extra tax due to this lack of proof.
Good records must include:
- Sales invoices
- Purchase bills
- Bank statements
- Payroll records
- Tax reports
2. Mixing personal and business money
Another common mistake is mixing personal and business funds. Many owners use the same bank account for both their own money and their firm money. This makes it hard to track what belongs to the business.
HMRC data shows that 30 percent of audit errors in small firms are linked to mixed accounts.
When money is mixed, auditors may treat some costs as private. This can raise tax bills. For example, a tech startup in Manchester lost 45000 pounds in tax claims because travel and phone costs were paid from a private account with no proof they were for work.
To avoid this, firms should:
- Use a business only bank account
- Pay all firm costs from that account
- Pay wages and owner pay clearly
3. Errors in tax returns
Tax mistakes are one of the main reasons audits start.
In 2024, HMRC collected over 7.2 billion pounds in extra tax from audit checks. Most of this came from simple errors in VAT, payroll, and company tax.
Common tax errors include:
- Wrong VAT rates
- Missing income
- Overstated costs
- Late filings
- Wrong payroll tax
A catering firm in Birmingham underpaid VAT by 180000 pounds because it used the wrong rate on food sales. This mistake was found during an audit.
4. Not keeping proof of expenses
Every cost claimed must be backed by proof.
Yet many firms do not keep full bills or receipts. A report from HMRC showed that 44 percent of cost claims checked in audits had missing proof.
This leads to:
- Costs being rejected
- Higher tax
- Longer audits
A design firm in Leeds lost over 32000 pounds in allowed costs because it could not show proof of marketing spend.
Firms should keep:
- Digital copies of bills
- Bank records
- Contracts
- Travel logs
5. Using the wrong audit or accounting rules
UK firms must follow UK accounting rules such as FRS 102 or IFRS for larger firms. Many firms use the wrong rules or apply them in the wrong way.
In 2024, the Financial Reporting Council said that 35 percent of company accounts reviewed had major errors in how income or costs were recorded.
This leads to:
- Wrong profits
- Wrong tax
- Poor trust
A construction firm in Bristol had to restate two years of accounts after an audit found that income was counted too early.
6. Poor audit planning
Many firms wait until the last minute to prepare for an audit. This causes stress and errors. Auditors need time to review data. When files are late or wrong, the audit becomes deeper and more costly. UK audit firms report that late data causes audit fees to rise by up to 25 percent.
Good planning includes:
- Year round record checks
- Clean data files
- Early contact with auditors
7. Lack of expert support
Many firms try to handle audits on their own. This often leads to mistakes.
A study by UK Finance found that firms using professional audit support were 60 percent less likely to face tax fines.
Experts help:
- Spot risks
- Fix errors early
- Handle HMRC
- Protect the firm
Are you confident you have the right support?
How athGADLANG helps firms avoid audit risk
athGADLANG supports UK firms through every stage of audit and tax review. We help with:
- Record checks
- Tax review
- Audit planning
- Risk control
- HMRC support
With the right guidance, audits become simple and safe.
Final thoughts
Business audits in the UK are strict for a reason. Mistakes cost time and money. Are you sure your firm is ready for its next audit? With clear records, correct tax, and expert help, you can avoid the most common audit errors and protect your business. athGADLANG is here to help you stay on the right path.
