A small UK limited company paid out money, but it is not allowed as expenses, either because receipts were lost, or the payment was made for things that HMRC doesn’t accept as valid expenses. That means obviously that the company’s profits are not reduced, and they lose money by paying more corporation tax.
However, the money in their bank account is now lower than it should have been. For example with £10,000 profit and £2,000 in expenses that were paid but not allowed to be deducted, the bank account contains £8,000 instead of £10,000.
Can the company get into trouble about this? Can HMRC claim they must have made some underhanded payments and someone evaded taxes, or is this situation legally fine? Would it help to keep proof of payments even if an expense turned out not deductible?