Record keeping in addition to a bank business a/c

A1P

I am a self employed plumber.My business a/c provides a virtually full picture of my business. I pay in cheques ,cash and receive bank transfer payments.Virtually everything is paid for using my business credit card.Very occasionally I have need to pay cash and keep these receipts separately.My detailed merchants invoices can be printed out from my phone and I have less detailed paper ones from the branch.My customers invoices ditto.I have a box of other invoices which match figures in my bank a/c.which states where they came from.Wages are clearly shown in my business a/c and personal a/c at same bank.The only items which don't show in my business a/c are a few small allowable expenses.Major ones,my van and all associated costs go through my a/c ,my phone ditto.,tools ditto.I have not used any professional package to arrive at gross earnings -expenditure = net earnings for my tax return.Could I be in serious trouble for arriving at correct figures via my current route of using the above.I do not see a lot of point in recording all this on paper or on the Web to 99.9% mirror my bank a/c.Prepared to be shot down in flames or gently reprimanded and corrected.

Aquamania

A1P wrote: »

I am a self employed plumber.My business a/c provides a virtually full picture of my business. I pay in cheques ,cash and receive bank transfer payments.Virtually everything is paid for using my business credit card.Very occasionally I have need to pay cash and keep these receipts separately.My detailed merchants invoices can be printed out from my phone and I have less detailed paper ones from the branch.My customers invoices ditto.I have a box of other invoices which match figures in my bank a/c.which states where they came from.Wages are clearly shown in my business a/c and personal a/c at same bank.The only items which don't show in my business a/c are a few small allowable expenses.Major ones,my van and all associated costs go through my a/c ,my phone ditto.,tools ditto.I have not used any professional package to arrive at gross earnings -expenditure = net earnings for my tax return.Could I be in serious trouble for arriving at correct figures via my current route of using the above.I do not see a lot of point in recording all this on paper or on the Web to 99.9% mirror my bank a/c.Prepared to be shot down in flames or gently reprimanded and corrected.

You need proper invoices/receipts for the tax man (if asked). A business bank account record of transactions only will not be sufficient.

Pennywise

So, how will a tax inspector check your tax return entries if there aren't any book-keeping records? They're not going to sit there all day whilst you play with your phone to find invoices to show them or watch you try to add up your bank statement entries to match the numbers you've put on your tax return.

A tax inspector will, quite rightly, expect to see breakdowns of all your tax return entries, i.e. a list of telephone payments totalling the amount in the telephone tax return box, and then be able to refer back to a sample of your telephone bills to check them.

Not doing basic book-keeping, or even proper listings of transactions, will massively increase the risk of your tax return being wrong, a fact that will be in a tax inspector's mind when presented with your book-keeping, i.e. nothing!

See HMRC's factsheet on their record keeping requirements:-

http://www.hmrc.gov.uk/factsheet/record-keeping.pdf

InsideInsurance

I know there was discussions of accounting changing but to the best of my knowledge it hasnt yet.

Remember that HMRC works on an accrual basis, so the day you raise an invoice is the date it must be hitting your official accounts not at the date the money hits your bank account. For this reason alone its unlikely that bank records are going to be enough to definitively prove your business accounts.

You dont need to have a massively complex system, even an excel spreadsheet can be sufficient and just log the details as and when you generate invoices or pay bills etc. It also helps you check your statements are correct

Pennywise

InsideInsurance wrote: »

I know there was discussions of accounting changing but to the best of my knowledge it hasnt yet.

Cash accounting for smaller sole traders and partnerships came in on 6/4/13 but only for the 13/14 tax year onwards, so no help for the 12/13 tax returns now due, which must as you say, be on the accruals basis so that monies owed, oweing and stocks have to be adjusted for.

But even with cash accounting, you still need proper record keeping so even if it was just the bank account, it still has to be properly analysed to segregate business versus private transactions and to analyse the expenses into the various necessary headings.

zygurat789

A1P wrote: »

I am a self employed plumber.My business a/c provides a virtually full picture of my business. I pay in cheques ,cash and receive bank transfer payments.Virtually everything is paid for using my business credit card.Very occasionally I have need to pay cash and keep these receipts separately.My detailed merchants invoices can be printed out from my phone and I have less detailed paper ones from the branch.My customers invoices ditto.I have a box of other invoices which match figures in my bank a/c.which states where they came from.Wages are clearly shown in my business a/c and personal a/c at same bank.The only items which don't show in my business a/c are a few small allowable expenses.Major ones,my van and all associated costs go through my a/c ,my phone ditto.,tools ditto.I have not used any professional package to arrive at gross earnings -expenditure = net earnings for my tax return.Could I be in serious trouble for arriving at correct figures via my current route of using the above.I do not see a lot of point in recording all this on paper or on the Web to 99.9% mirror my bank a/c.Prepared to be shot down in flames or gently reprimanded and corrected.

My experience is that bank accounts are usually very good at showing all transactions but they tell you not much else.
You should keep an analysis of all payments made through the bank over the headings on your tax return. The annual totals of this analysis are the figures on your tax return. Each item should be supported by an invoice filed in the same sequence as the payments.

A1P

Aquamania wrote: »

You need proper invoices/receipts for the tax man (if asked). A business bank account record of transactions only will not be sufficient.

I do have matching paperwork ie copies of invoices to customers to match payments in-earnings,copies of invoices for items purchased-expenditure.I annotate any customers names for cheque,cash,bank transfer payments.In the end for tax return purposes I am asked for 3 figures Earnings,Expenditure,profits.
I accept and expected to be told I need better record keeping.However I know my figures are accurate and that I am not over or under paying tax.
I can show this via paperwork/basic maths.Someone seemed to be suggesting I should have numerous categories e.g. telephone etc .Is this necessary for me or the authorities as their interest seems to be in the 3 basic areas above.Expenditure however many categories you have still comes to a total expenditure when added up.However it looks like some simple free programme/spreadsheet would be suitable for my needs.My year boils down to 40-60 jobs,similar invoices for parts etc,allowable expenses,wages monthly,I don't usually carry stock if I had it would be £100/200 carried forward.I am happy with the help given so far and had a look at relevant Gvt .site

zygurat789

A1P wrote: »

I do have matching paperwork ie copies of invoices to customers to match payments in-earnings,copies of invoices for items purchased-expenditure.
You should have the original invoices
I annotate any customers names for cheque,cash,bank transfer payments.In the end for tax return purposes I am asked for 3 figures Earnings,Expenditure,profits.
You only have to put three figures on the tax rteturn but you need to have a record of how these have been arrived at.

I accept and expected to be told I need better record keeping.However I know my figures are accurate and that I am not over or under paying tax.I can show this via paperwork/basic maths.
You knowing is not good enough, you have to be able to demonstrate that they are correct


Someone seemed to be suggesting I should have numerous categories e.g. telephone etc .Is this necessary for me or the authorities as their interest seems to be in the 3 basic areas above.
This helps you by providing useful information to help you run your business and claim all the allowable expenses.


Expenditure however many categories you have still comes to a total expenditure when added up.However it looks like some simple free programme/spreadsheet would be suitable for my needs.
Excell is OK

My year boils down to 40-60 jobs,similar invoices for parts etc,allowable expenses,wages monthly,I don't usually carry stock if I had it would be £100/200 carried forward.I am happy with the help given so far and had a look at relevant Gvt .site

Two questions.
Is your total turnover above or below and anywhere near £70K.
Who are the wages paid to?

A1P

zygurat789 wrote: »

Two questions.
Is your total turnover above or below and anywhere near £70K.
Who are the wages paid to?

My turnover is below the VAT threshold.I appreciate there will be significant paperwork implications if/when this occurs.
I pay a lump sum to my personal a/c at the same bank every 4/6 weeks and these are identified on my bank statement.From this year I am going to do it via standing order as the business will now stand it.
I don't have the computer skills to create a programme.I have avoided commercial ones not solely on cost grounds but because they are 2 complex for my needs.

antrobus

A1P wrote: »

.....Could I be in serious trouble for arriving at correct figures via my current route of using the above....

Serious trouble? That's very, very, unlikely.

By tradition, most self-employed people present their accountant with a shoebox crammed with (a) copies of their bank statements for the year, and (b) a pile of invoices in no particular order. If you have actually organised your paperwork so that it's clear which payment they relate to and are annotating your bank receipts with customer details, then you are well ahead of the game.:)

The probability that HMRC will select you for a random audit is very small. The chances that they will get upset with your standard of record keeping is pretty small.

A1P wrote: »

.... I am asked for 3 figures Earnings,Expenditure,profits...I can show this via paperwork/basic maths.Someone seemed to be suggesting I should have numerous categories e.g. telephone etc .Is this necessary for me or the authorities as their interest seems to be in the 3 basic areas above.....

Understood. You are being asked to complete the short version of the self-employment return, so there is no apparent need to break down your expenditure any further. If a professional accountant was dealing with your accounts, they would of course break down your expenses into various headings such as motor expenses, telephone etc., and they might ask questions regarding whether or not all these expenses were indeed allowable for business purposes. HMRC might ask similar questions.

A1P wrote: »

....I don't usually carry stock if I had it would be £100/200 carried forward...

HMRC likely wouldn't care about £100's worth of stock. Actually they probably wouldn't really care if you didn't 'properly' accrue an invoice either.

Pennywise

zygurat789 wrote: »

Who are the wages paid to?

Are the "wages" paid to you or do you employ workers?

If it's paid to you, it's not an expense for tax purposes and shouldn't be included on your tax return.