Do self-employed people HAVE to claim all expenses?

Lentilsforteaagain

Oh thank goodness I'm not the only one to worry about it all! I must admit, I don't claim expenses for any gas, elec, telephone or internet which I suppose I should as it's an internet business ...

sodamnfunky

Lentilsforteaagain wrote: »

Oh thank goodness I'm not the only one to worry about it all! I must admit, I don't claim expenses for any gas, elec, telephone or internet which I suppose I should as it's an internet business ...

I think its only natural, as you hear so many horror stories about the investigations, however, if I have made a mistake, it is just that a mistake, and I would just pay anything I needed too.

Im sure though that the investigators are fine and at the end of the day just people doing their jobs. TBH an investigation of my accounts would only take around 30 minutes, they really are that simple.

smurfitlee

I'm glad to see that there are other people who find this kind of stuff quite intimidating! Like others have said my accounts are dead simple, but that doesn't stop me worrying about my methods etc.

It can't be a massive thing for the taxman as I have submitted at least three tax returns with zero expenses recorded and no investigation, so I guess there's no great big red button with a huge alarm system when someone doesn't claim expenses.

I also share the problem of what to do about electric, broadband etc, confusion about percentages...I think I'll just steer clear of that, but I might start claiming for things that I have invoices for and that are clearly business only. And maybe get an accountant! (I say that every year and then decide to save the money...)

Lentilsforteaagain

Oooh, I'm sure it would take the tax man alot longer with mine! I'm just never really sure about how far to go with keeping records (ie receipts/statements, etc). I always keep the till receipt for shop bought stuff which is usually in amongst my own shopping so clearly marked to highlight, my Paypal payments in and out are all online but I should probably print these off (or should I? Wouldn't they just stay available online?) but I don't keep bank statements - I just think I'd get copies of the ones the tax man needed to see at the time. Does that sound fair enough? I'm just not sure!

Having said all that, I don't yet earn enough to pay any tax but still worry so much! There must be so many small business people who lose sleep over being unsure about how to do things "correctly" ... nice to know we're all in the same boat

sodamnfunky

Lentilsforteaagain wrote: »

Oooh, I'm sure it would take the tax man alot longer with mine! I'm just never really sure about how far to go with keeping records (ie receipts/statements, etc). I always keep the till receipt for shop bought stuff which is usually in amongst my own shopping so clearly marked to highlight, my Paypal payments in and out are all online but I should probably print these off (or should I? Wouldn't they just stay available online?) but I don't keep bank statements - I just think I'd get copies of the ones the tax man needed to see at the time. Does that sound fair enough? I'm just not sure!

Having said all that, I don't yet earn enough to pay any tax but still worry so much! There must be so many small business people who lose sleep over being unsure about how to do things "correctly" ... nice to know we're all in the same boat

You really should keep your bank statements, that will be a minimum if the tax man needs to see anything, and I believe most banks charge for copies.

If I was you I would keep every invoice or receipt you get for your business.
Like you I highlight anything i buy for business, which is amongst personal stuff. This tax return is only my 3rd one after going back to SE. My income has steadily increased as has my tax liability. Next year however could be very different :rolleyes:

jimmo

I think the people concerned need to put this into perspective.
The OP didn’t actually say he was working full time as self employed but that was the impression I got when I first read his post. The tax “rules” are that a self employed person should determine his business profits using standard accountancy principles and that business profit then has to be adjusted to disallow those items which are not allowable for tax purposes.
Strictly speaking you really should claim all you are entitled to claim but if you fail to claim what you are entitled to HMRC is not, generally, going to challenge your failure to claim.
The OP said that he can’t be bothered claiming £30 a year. In many ways that makes sense because the time spent in recording the figures etc could well be disproportionate to the potential tax saving of £30 @ 20%) £6.00.
However, if he is making his living solely from his self-employment and he is making enough to pay tax then I just cannot see that his business expenses would be only £30 a year.
HMRC would then definitely smell a rat.
Just for the uninitiated, it might only take a half an hour to go through your business records but the key to any Enquiry is to seek to establish what is not in your business records and should be. That really is a very different story. That is why you will always be required to produce your personal bank accounts as well as your business bank accounts.
So, if you miss out a few minor items of expenditure that’s not really going to bother HMRC but if you miss out items which are common and normally significant for your particular type of business then beware.
The point of the OP’s post seems to be that his business expenses have increased quite significantly and he is considering not claiming them in order to artificially inflate his income for the purposes of applying for a mortgage.
I’m definitely no expert when it comes to mortgages but it strikes me that deliberately overstating your income on a mortgage application is plain and simple fraud in exactly the same way as deliberately understating your income for tax purposes.

jholford

Hi all,

This is one of my first posts on here and thought I would share my limited knowledge / experiences with you. I have been trading self employed for 7 years. Unfortunatly I am not the most organised of people and are 3 years behind on my self assessment!!! In previous years I have used a local accoutant that charged me £235 to prepare my accounts and file my return. A small price to pay to remove all the hassle and they save you that amount easily plus the cost can be offset as a business expense. I am in the throws of filing my accounts and have used their accounts as a template. I am struggling to understand why there are people posting on here that have business expenses that they don't want to claim for. Surely you are only lining the tax mans pocket with your cash that you are entitled to offset against your tax deficit.

There are numeruos websites out their offering free advice on what you can and can't claim for. The Business Link website is propably the best going for advice visit this link for help

http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073863880&r.l1=1073858808&r.l3=1081526181&r.lc=en&r.t=RESOURCES&r.i=1081563500&r.l2=1073859209&r.s=e

I also found a very interesting article on claiming council tax and the interest on your mortage payments earlier this evening.

http://www.independent.co.uk/news/business/news/selfemployed-can-set-mortgage-costs-against-tax-says-hmrc-857698.html

I have been led to believe in the past by my accountant that you can legitimatly claim for any expense that relates to the running of your business. Obviously it is down to you to prove the case should you get investigated by the HMRC but this can easily be done by keeping receipts, bank statements, utility bills etc and a simple set of accounts. I am definatly not clued up on taxes or accounting but there is a lot of usful info out there to assist people in claiming what is rightfully theirs. i.e. YOUR HARD EARNED CASH

Hope this Helps.

silvercar

I work from home and have my own VAT registered company. I recently had a VAT inspection where the inspector pointed out that I could claim the VAT back on business expenses like petrol. I told him that I couldn't be bothered for the hassle involved. He said that was fine, it is not compulsary.

Pennywise

sodamnfunky wrote: »

Im sure though that the investigators are fine and at the end of the day just people doing their jobs. TBH an investigation of my accounts would only take around 30 minutes, they really are that simple.

That's a very naive and dangerous assumption to make. A client of mine was under investigation by HMRC for three years - the enquiry has just been closed with absolutely no additional tax due - not even a penny, though no apology either for wasting my client a lot of time and money. The tax inspector used every trick in the book - once he found the business accounts were basically sound and there was nothing obvious in them, he found a minor flaw in the record-keeping which he exploited to launch an enquiry into the personal tax and financial affairs of the proprietors. He ended up going back 6 years for both business and personal affairs - every time he hit a brick wall, he just found another minor issue to exploit, thus opening up more avenues of enquiry. He clearly got a thought into his head that they were on the fiddle and although he couldn't find any evidence, he was like a dog with a bone and wouldn't give up. Client was represented by a leading tax investigation consultant and we went to the commissioners a couple of times to apply for their direction to close the enquiry, but the inspector was proved to be right every time when he found a minor issue to exploit. It cost the clients thousands in professional fees to prove his innocence and he was close to a nervous breakdown - he is still under the GP for depression. The way I work and my advice to clients is to keep your head down - the last thing I do on every client is a "sanity check" - I put the file away for a day or two, then come back to it cold and take an impartial look at everything - I make sure it all looks sensible and there are no inconsistencies or anything that looks strange - if anything stands out, I either change it's presentation or make sure that I write an explanation as to why. My advice to the OP would be either to claim the expenses properly, or if not, to at least make a note on the tax return "additional information" section to explain why he isn't making a claim.

tyllwyd

Lentilsforteaagain wrote: »

... my Paypal payments in and out are all online but I should probably print these off (or should I? Wouldn't they just stay available online?) but I don't keep bank statements - I just think I'd get copies of the ones the tax man needed to see at the time. Does that sound fair enough? I'm just not sure!

If it was me, I'd print out and keep on file all bank statements and Paypal statements as they happen ... otherwise it is such a hassle trying to get them back, and you are relying on the bank/PayPal that you will be able to get them back easily. If you've got everything in a box in the attic, at least you know where to go to find it if it is needed.