1. Understatement or omission of income due to incomplete recording of revenue
• Failure to tally all invoices due to poor record keeping
• When revenues are generated through alternative channels and not properly reported (e.g., a construction company failing to report revenue made from selling scrap materials)
2. Incorrect claims of capital allowances on non-qualifying assets
• Claiming capital allowances for assets that don’t qualify as ‘plant and machinery’
• Claiming assets purchased for personal use
3. Failure to apply the arm’s length principle for related party services
• Transactions between related parties and between unrelated parties must be priced the same
• Companies were found not charging or charging far below normal pricing for related parties
4. Poor record-keeping and incorrect claims by family-owned/ managed companies
• Failing to keep records of purchases and expenses
• Failing to make distinctions between business and private expenses
• Claiming tax deductions on compensations paid to directors or family members that were not commensurate with actual services rendered
TAKEAWAYS
• Keep all records and documentation and make sure they are organized
• Properly record any revenue generated even if the source isn’t your main source of income
• Only claim business assets that qualify as ‘plant and machinery’ by IRAS
• Do not undercharge related parties
• Do not mix up business and private expenses – and only claim assets there were purchase for business use
• Do not claim tax deductions on payments to the company’s director or to family members that were not commensurate with actual services provided