By the time a revenue authority opens an examination, the positions under review are years old. Records have moved, the people who made the entries have often moved too, and the cost of reconstructing a rationale is far higher than the cost of documenting it at the time.
A tax health check is simply the discipline of examining your own filings the way an examiner would, before anyone else does. It is not an admission of weakness. It is how a finance function converts an unknown exposure into a managed one.
What a health check should cover
- Reconciliation of tax filings back to the audited financial statements, head by head
- Treatment of disallowable expenses and the evidence supporting each judgement
- Withholding tax coverage across vendor categories, including the ones easily missed
- Related-party transactions and whether the transfer pricing position is documented
- Employee benefits and the boundary between reimbursement and taxable emolument
Documenting the reasoning, not just the number
Most contested positions are not lost because the answer was wrong. They are lost because nobody recorded why it was right. A short memorandum written when a transaction closes — what was decided, on what basis, and what was considered and rejected — is worth more under examination than a large file of invoices.
The cheapest hour you will ever spend on tax is the one spent writing down why you took the position.
Where to start
Begin with the heads of tax carrying the largest balances and the shortest documentation. In most organisations that means withholding tax and employee-related taxes, where volume is high and each individual decision looks too small to record. Aggregate exposure builds quietly in exactly those places.
This article is general commentary and not advice on any specific set of facts. For guidance on your own circumstances, speak to our team.