As you can imagine, I get lots of paper arrive via the postman (I’ve yet to have a postwoman), and in it are loads of receipts that the client expects i can create a set of books and then accounts from them. Well – that is my job. But sometimes it is hard to explain what an appropriate receipt is in case their tax return is pulled up by HMRC for inspection. It’s worse still if the client is VAT registered, as not only do you have to have an appropriate receipt, it needs to be a VAT receipt.
Just a wee bit of advice below on what you need to provide either your bookkeeper, accountant or me, or if HMRC want evidence of costs. It is relevant for the self employed and limited companies, so buckle up – it is only a short one !
And here is the transcript if you would prefer to read the text.
People ask me about credit card receipts and debit card receipts. Well, they are not really an allowable receipt for your business. The reason being is there’s no detail on what was purchased, there’s no evidence that the purchases are wholly and exclusively for your business and if you’re registered for VAT there’s no split on the VAT account. So really, using your debit or credit card receipts is not a very effective accounting, bookkeeping you need. What you always need to do is make sure that when you go into a store, you get a proper till receipt or a proper itemised receipt that you use for your business.
Now if you’re using an online accounting system then you need to make sure you only take the picture of the full receipt and not the debit card because the systems going to think they’re two different receipts and it’s going to book it twice. Me as an accountant, when I get a shoebox of stuff, the first thing I do is put everything into date order and match the two credit cards and the debit card receipt to the actual receipt. It takes a lot of time, your paying an hourly rate, so it’s something you can probably do yourself.
I always advise, match the credit card receipt to the actual receipt, only put through the actual receipt for your bookkeeping and then if you do spend cash, separate it out. So yes, debit card receipts you can use but please always, always, always collect the proper receipt, especially if it’s something for entertaining or subsistence. If I see a receipt for the Mcdonalds say, for £30, I know it’s really not just for you, unless you’re very, very hungry. The debit card receipt for that goes straight to entertaining. So ignore the debit card and credit card receipts, go for a proper receipt, use those in your bookkeeping.
When it comes time for that dreaded tax return, I get asked a lot about what information a client needs to provide. Of course if you are reading this and you are not a client of ours, this will help you understand what you need to provide your client or indeed the information you need to have to hand to do your own tax return.
This quick 192 second video will go through the typical things you will need, but don’t worry about pausing it and writing it all down, as a complete check list is at the bottom of this post which goes into the main categories. There are areas missed out like seafarers allowance, residency, maintenance payments etc, but the bulk of it is covered.
Any questions, please let us know, or feel free to join the performers tax & accounts group on facebook – a safe place to ask the questions you can’t find the answers to , or not sure if you have found the right answers. That link is here >>https://www.facebook.com/groups/PerformersTax/
Checklist for Self-Assessment – 2016/2017
This is a checklist of the most common information we will need to prepare your tax return. It does assume a self assessment year to the 31st March 2017 / 5th April 2017 so if you have a different year end under self employment, then the date range will be different. It will be your accounting year that ends between 6th April 2016 and 5th April 2017, so if you are a teacher and you make up accounts to 31st August, then I will need your self employed information for the year to 31st August 2016, but all other tax information as at 5th April 2017. Sorry – I know it gets confusing.
Just so you are aware, HMRC do check tax returns against information from banks & building societies so make sure you get your interest certificates; they also run checks against employers PAYE returns when they compare your national insurance numbers. If there are differences, HMRC will open an enquiry into the tax return – although the delay is often 9 to 18 months after submission.
Employment(s) – All employments in the year
Salary and tax paid
P60 for employment as at 5th April 2017 (normally available April / May)
P45 for each employment left in the year
If you have a student loan, then the last payslip for each employment left so that we can see how much student loan was deducted for that employment
Benefits & expenses
P11d from all your employers in the year if you had any benefits (normally available June / July)
Notice of coding for 2016/2017
Not vital, but it shows what HMRC are expecting on your tax return
A list of tax deductible expenses with regards to your employment – e.g. professional subscriptions, uniform cleaning, travel expenses etc
State pension letter for 2016/2017
This will be dated around Feb 2015 and says how much per week you will get. We cannot use your bank statements showing actual payment.
P60 or certificate of pension paid. Normally tax will have been deducted.
Other taxable benefits
If you have taken a lump sum as your pension, you should have been issued a P45 or other certificate showing amount taken and tax deducted.
If we are doing your bookkeeping for you (pre-arranged) then we need all your business records including bank statements, invoices issued, remittances for money received, invoices paid, expenses paid, fixed asset information, car mileage, working at home allowance details etc.
If you are providing you bookkeeping information, then please provide the summary sheets and back up files (we have standard workbooks to help), plus justifications for tax sensitive entries.
Details of income under the “rent a room” scheme
Accounts per property for rental including mortgage details showing the split between capital & interest. If we are doing the bookkeeping for your property, then please provide the rental statements, and invoices/expenses paid, along with the mortgage statements
Details of the property as to whether it is furnished or unfurnished, or if a holiday let.
This needs to include any joint account (please advise the split to be made) as well as any accounts that may have been closed in the year. We do not need details of interest on cash ISAs or dividends received in stocks & share ISAs.
Interest from banks & building societies
Certificates of interest received
Bank statement sheets (normally April) showing how much interest has been paid and the tax deducted
Statements showing if interest has been paid gross
PPI settlements received
The amount received will also have some interest paid and tax deducted so a certificate/letter will be issued along with the repayment.
Dividends from UK companies / unit trusts
Dividend / distribution vouchers showing dividends received, date & tax credit. If you are a director/shareholder of your own company, it is vital you have this information yourself or from the company accountant.
National savings interest received gross
Statement of interest received
Overseas income – Dividends or other income
Income withheld certificates from each country where income has been received from and a note to tell us if included in self employment accounts.
Other Income and State Benefits
A note on child benefit received, and if either parent has income over £50,000
State benefits received as some are taxable
Payments in to a personal pension (not employer pension)
Payments made – dates, amounts, policy details
Payments made into an annuity
A list of payments made (charity, date and amount) and if a regular payment or a one-off. Gift aid certificates are available if through an on-line giving site, or your knowledge if you signed a gift aid form.
Student loan repayments
This is often found on payslips, but you should be able to get a student loan statement showing payments made for the year to 5th April 2016
A note to say if you expect the student loan to be repaid in the next two years.
If you have sold any major assets (main residence), or sales of shares etc which may give rise to a capital gains tax transaction.