Should expenses and income always be linked in a tax return?

textbook

I always buy my paint or other things for jobs and it's recorded on my bank statements  are bank transfers from customers or if cash in the form of invoice.   Should you always be able to link an expense to a particular job?    I can't always remember what particular job is linked to what particular expense

Another thing I've thought of is when I invoice for a job the cost if paint or whatever is included on there, however it's also recorded on my bank statement as an expense, is this then giving me an incorrect figure on my tax return as I'm billing for the expense off customer and also taking it off as an expense?   

nick74

You don't have to keep a record of exactly what materials were used for which jobs as long as you can show that all of the materials were purchased wholly and exclusively for the purposes of your business.

I'm not sure what you mean about the expense giving you an incorrect figure? Surely that's how business works, you buy goods and you sell them to customers, so the paint you supply to your customers will be both a sale and an expense to you?

etienneg

If you mean you are putting down the cost of a particular tin of paint as an expense twice (because you put it on a customer invoice and it shows on your bank statement), then yes, you are counting it twice and arriving at an incorrect figure for your business expenses.

You can't just look at random bits of paper and put figures down because a particular word (in this case "expense") shows up! In simple terms, you should be able to write each of your business figures in one of two columns - money coming in (from customers, etc.) and money going out (for materials, running your van, etc.). The money going out column represents your expenses.

Pennywise

You show your total sales invoice as income (time AND materials), then you deduct the costs of materials/expenses bought for business purposes, one less the other is your profit.

Sounds as if you're only including your time invoicing as income which is wrong.

PRAISETHESUN

As above - it sounds like you're double counting expenses??

Unless there's a particular reason you want to apportion costs to particular jobs (eg. you are differentiating to the customer between supplies and labour on your invoice) then I'd just track them in total as business expenses. Otherwise you need to adjust your record-keeping such that you match up particular expenses with particular jobs - something simple like an Excel spreadsheet could sort this. If you use the same supplies for multiple jobs, then you need apply the costs to each job for the amount of materials actually used for said job (eg. 1/2 paint tin @ £100/tin = £50) so you don't double-count expenses.

textbook

Pennywise said:

You show your total sales invoice as income (time AND materials), then you deduct the costs of materials/expenses bought for business purposes, one less the other is your profit.

Sounds as if you're only including your time invoicing as income which is wrong.

Pennywise said:

You show your total sales invoice as income (time AND materials), then you deduct the costs of materials/expenses bought for business purposes, one less the other is your profit.

Sounds as if you're only including your time invoicing as income which is wrong.

I'm listing the expenses sometimes to the customer e.g. paint and adding that to their bill.   That figure then comes in as an income.   Then from bank account as I always pay for expenses with card that's what Im taking off as expense.   Not minusing the expense off invoice as well.  I guess Im doing it all ok