Please could somebody confirm if I can use bank statements as a receipt because one of my clients forgets to keep some off his receipts. He has the entries of expenditure on his credit card statement - Is this allowable or not?
in exceptional circumstances as a one off HMRC generally (but not necessarily) accept the odd low value receipt through the credit card statement espechially where other regular statements for similar amount usually have receipts.
The issue with not having detailed receipts of course is that clients put all manner of things through on their credit card when doing things like filling up with Petrol so the credit card receipt showing Esso, £45 may actually break down as £28 Petrol, then magazine, sandwiches, sweet's, pop, etc. for the rest which is why HMRC are so pinicity about receipts evidencing everything.
HMRC's view tends to be that if there is no receipt then it's missing in order to hide something!
You may want to educate the directors of this business that expenses without receipts will be going to the directors loan account and site the above reasoning.
All the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you, that was exactly what I was thinking especially about the petrol receipts. I have actually told my client that I will only put his petrol receipts through and not what is on his credit card/bank statements because we can't prove that it was only petrol purchased in the transaction.
He is a carpenter and has lots of purchases from Wickes and Jewson that he hasn't kept receipts for these are the only ones I have put through, hopefully this will be ok.
There's not a lot that you can buy from either of those places for a carpenter which are not work related.
Going forwards though if your having real difficulty getting receipts out of him from those places, assuming that he's credit worthy might be time to get him to open an account with them as you'll get a monthly breakdown of expenditure (which can be reprinted by Wickes/Jewson if the client loses it) and that has to make life easier for everyone.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Just to play the devils advocate, a batch of entries paid to Esso are going to be majority motor fuel, whereas the same to Wickes could be for work done on his own property or even on carpentry jobs for which there is no sales invoice.
There's no substitute for an invoice but if he kept a mileage record, then it would be possible to ascertain approximately how much of the Esso transactions are for work.
Thank you there is that as well. I think I will have to have a chat to him about being more organised with his receipts. So frustrating when all I need is a simple receipt to carry on with my work, maybe I should explain that me not having his recepits would be like me taking his tools and asking him to hang a door!
Anyway thanks for you advice Tim I will take it into account.
Better still Vicki, is if he keeps a written weekly record of income and outgoings because contemporaneous records carry more weight than estimates arrived at, say, twelve months later. It is difficult for an Inspector to disallow such a record particularly if backed up by a supplier name on a credit card statement. You could mock-up a landscape form with columns for his most common transactions *.
For example, if the records showed fuel expenditure of around £1000 in 2009 and 2011, but he only had receipts for £500 in 2010, then if his weekly bookkeeping listed a further £600 fuel in 2010, then a claim based on £1100 ought to be made.
It is a requirement that the taxpayer keeps a record of private use, including goods used for DIY at home. What I am getting at is that the records should be even more water-tight than just receipts and invoices. I we use good judgement and assist our clients to save tax *, then our services are likely to be in greater demand.
This tax year 2010/11 is the first tax year I have looked after his accounts. I only started bookkeeping at the beginning on July so I am still learning the ropes, if you might like to say! I think I will have to sit down with him and go through his previous assessments which he completed himself and see if we can come up with a chart to try and even his expenses out a bit. This year and next year are the only years I will be working for him because he's leaves to go travelling for a year in the next couple of weeks so he will no longer be self employed.
I really do appreciate the advice though Tim, which I can use with many more clients no doubt, thank you very much.
The bottom line profit/loss can be more skewed by not adjusting accurately for private use than allowing every transaction you suspect of containing newspapers, tobacco and sweets etc.
In the example above; having allowed the extra £600, be prudent and consider three things: "I cannot be 100% certain about the missing ones the client should be more careful and it'll cost more than its worth to argue the toss with HMRC so then add back say, £50 of the fuel in the profit computation (if he doesn't smoke, this is a lot of sweets). Explain to him this may cost him £15 in extra taxation. He may be adamant that he never buys these private things with his fuel.
A bank statement entry is proof of purchase, but I'd take a harder line on claiming VAT without a proper invoice in the knowledge that if I do not reclaim it, 100% of the bill will reduce the income tax.
Look at the bigger picture. He's as likely to be doing cash jobs with no sale recorded.
