Home to work travel expenses, self employed.

dungie203

From the research i have done the travel cost from my home to my place of work (market hall) is not tax deductible.

Should i still be keeping a record of this expense or does it just come out of personal cash?

For some reason i have been under the impression i only need to record tax deductible expenses and have records, ie invoices and receipts etc, to back this up.

*Sorry i have just realized this is not technically a money saving or tax cutting question so please can someone delete if inappropriate*

CLAPTON

dungie203 wrote: »

From the research i have done the travel cost from my home to my place of work (market hall) is not tax deductible.

Should i still be keeping a record of this expense or does it just come out of personal cash?

For some reason i have been under the impression i only need to record tax deductible expenses and have records, ie invoices and receipts etc, to back this up.

*Sorry i have just realized this is not technically a money saving or tax cutting question so please can someone delete if inappropriate*

you may personally wish to keep records of your journey to work, but they have no relevance to your tax and HMRC don't require you to keep any such records.

it's a perfectly OK question for the tax board.

dungie203

Thanks Clapton, so i only need to keep a not and proof of what is tax deductible?

Could i also ask a quick question about drawings from my business, do i just keep a note of any cash we take out for personal use and enter it under that months outgoings? I know it is not deductible from profit for tax purposes but do i still need to keep a note of it?

To be honest our business has been so small as of yet i have never taken a note of drawings as any profit made (if we have been lucky lol)at the end of the year has been spent by us anyway so i now exactly what we have had. We start a new venture in March though which im hoping will earn a small wage so im thinking i should note down everytime we take cash from out takings.

[Deleted User]

Given what you have said regarding the size of your business it seems unlikely that you will be preparing a balance sheet with your accounts.

Drawings, therefore, are totally irrelevant to your tax return. Bank manager might have an issue though!

chrismac1

Depending on how you conduct your trade it may be possible to make an argument that travel expenses are claimable. There were some key cases in the run-up to the Olympics which HMRC lost, some of my clients have been dining out - literally! - on these cases ever since, as their travel costs and evening meal costs are claimable.

The key issue is where your "base of operations" is. I have a client who runs market stalls over the winter months especially around Christmas, in covered markets. Where is the "base of operations"? The covered market, or my client's home?

Stock is stored at my client's home most of the year. So is some key equipment with which the trade is carried on, such as burger frier. His business insurance is addressed to his house. In my view, his "base of operations" is his house following the precendents set by the Olympics tax cases and that will remain my view until such time as HMRC successfully enquire into his tax returns and shoot down my case.

So depending on how you conduct your trade, your travel costs may not be a dead duck from a tax point of view.

dungie203

[Deleted User] wrote:

Given what you have said regarding the size of your business it seems unlikely that you will be preparing a balance sheet with your accounts.

Drawings, therefore, are totally irrelevant to your tax return. Bank manager might have an issue though!

All i was planning on keeping is a page with all incoming cash on it and a page with all deductible outgoings on it. I would imagine 100% of it and all drawings will be cash.

I was going to do much more complicated accounts but to be honest after speaking to some of the small market stall holders where we work, there accountant tells them to keep it as simple as possible, ie one page for incoming and one page for outgoing and that's it.

I really want to keep it as simple as possible, im not even sure if i can afford an accountant yet so i need to be able to understand it.

Are you saying then the taxman does not require me to keep a record of any drawings/wages that i make? To be honest any profit at the end of the year will be our total drawings for that year if that makes sense.

CLAPTON

dungie203 wrote: »

All i was planning on keeping is a page with all incoming cash on it and a page with all deductible outgoings on it. I would imagine 100% of it and all drawings will be cash.

I was going to do much more complicated accounts but to be honest after speaking to some of the small market stall holders where we work, there accountant tells them to keep it as simple as possible, ie one page for incoming and one page for outgoing and that's it.

I really want to keep it as simple as possible, im not even sure if i can afford an accountant yet so i need to be able to understand it.

Are you saying then the taxman does not require me to keep a record of any drawings/wages that i make? To be honest any profit at the end of the year will be our total drawings for that year if that makes sense.

the taxman is concerned with your
turnover (income) and your allowable expenses
and your profit : the difference between your turnover and expenses on which the tax/NI is based


your 'drawings' have no tax significance.

dungie203

CLAPTON wrote: »

the taxman is concerned with your
turnover (income) and your allowable expenses
and your profit : the difference between your turnover and expenses on which the tax/NI is based


your 'drawings' have no tax significance.

This is what i thought and it makes logical sense.

I am a little confused though because on https://www.gov.uk under, "A general guide to keeping records for your tax returns", it starts off by saying the following which goes along with what your saying:

"You should keep any records and documents you have received, or have prepared, that will be used to complete entries in you Self Assessment or Company Tax Return, or your claim form if you're claiming benefits or allowances."

Now to me that makes perfect sense, all incoming monies and all outgoing deductible expenses. Later on though it goes on to say, under the heading "Other records you may need to keep":

"Personal Drawings

You should keep a record of any money you take for your own or your family's own personal use from:

* business cash
* your business bank account, or
* your personal bank account if you do not have a business bank account

If you withdraw money by cheque, an entry on the cheque stub will be enough to show it is for personal use"


I can not work out why i would have to keep such records and i also cannot see why HMRC would be interested in how much cash i have taken out of the business, it is after all not being deducted off any profits i make and i haven't seen any mention on monies taken for personal use on a Self Assessment form?

Darksparkle

Website here that's says why you should - http://www.freeagent.com/central/self-employed-expenses/

Don't see it being difficult to keep a record of it if it keeps tax man happy.

Wouldn't it help if subject to a compliance check if they didn't think you were declaring all your income or there was a means issue?

chrismac1

Dungie, one of the commonest sorts of tax enquiries concerns the situation where a person's lifestyle cannot be explained by their declared income, which in the case of a self-employed person is really drawings.

These cases are becoming more common due to the HMRC digital intelligence unit. This has a digital picture of every UK citizen made up of lots of data such as bank accounts, tax returns, Land Registry, credit cards and so on. The exact data sources are of course speculation as the people who work in this unit cannot disclose the total data sources on which their algorithms are based.

If your digital footprint should loook like a circle, but it looks like a circle with a big segment missing, the inference is that that missing segement is potentially your black market, undeclared income.

So it is quite common for taxpayers to be challenged on the basis that their drawings are not sufficient to maintain their lifestyle. If you are declaring £20k of drawings per year and driving a Bugatti Veyron then HMRC are likely to be on your case.

dungie203

Darksparkle wrote: »

Website here that's says why you should - http://www.freeagent.com/central/self-employed-expenses/

Don't see it being difficult to keep a record of it if it keeps tax man happy.

Wouldn't it help if subject to a compliance check if they didn't think you were declaring all your income or there was a means issue?

No it is not a problem, it is just not something i had done before and i could not work out why they would need it.

So things like bus fare and other non deductible expenses i should just class as drawings and keep a note of how much we spend?