You know you need to always keep receipts, right? But why is it people don’t?
Why do receipts end up lost? Maybe you just weren’t given one when you bought something? Or maybe you didn’t ask for one?
Does this sound like you?
If it does, I’m going to explain why you need to change the way you think about the value of receipts, because every single one is worth money to you and your business.
- WHAT EXACTLY IS A RECEIPT?
So that you can reclaim the cost of something you have bought, you need an itemized receipt.
This needs to show the details of the item purchased, because this is proof that it is a legitimate business expense. It should also show the date, the amount, and the VAT number of the seller if relevant.
If you paid by debit or credit card, you will probably have been given a card payment receipt. This are NOT the same thing as an itemized receipt and should not be used to claim as a business expense as they show no item details.
- WHAT IS THE COST IMPLICATION OF A RECEIPT?
For every receipt that is not uploaded, you are not able to claim that amount against your sales. This means that your profits will be higher and therefore you will pay more tax.
The amount of tax you pay will depend on whether you are a sole trader paying self-assessment tax or a limited company paying corporation tax. But whichever it is, you will lose out.
And if you are also VAT registered, you will not be able to claim the VAT back on any relevant receipts, so you will pay more on your VAT returns than you need to.
- WHAT CAN HAPPEN IF YOU DON’T KEEP RECEIPTS
If you don’t value receipts, the chances are that you don’t value other areas of your accounts, and this can lead to issues. Your accounts are the foundation of your business, and you need to keep them as healthy as possible. They will serve you well if you look after them. But if left untidy, you could be storing up issues.
For example, if you claim any expenses without keeping a receipt, you will not be able to prove that expense if HMRC carry out an inspection. And if they see you have done this once, they will dig deeper. This could result in fines and interest penalties on the amounts claimed incorrectly.
And tidy accounts can be so powerful…they can give you up to date information about what you owe, how much you are owed, accurate data on how much profit you are/are not making. If it’s not accurate, how can you chase customers for payment if you don’t know what they owe you?
- HOW DO I PROCESS MY RECEIPTS?
Gone are the days when you give your accountant a carrier bag full of receipts. If you are still doing this, get another accountant because you deserve better…it is so easy to manage your receipts at the point of payment.
All of our clients have access to an app called Hubdoc…it is part of Xero which is the accounting software we use. When you are given a receipt, you literally open the app and take a photo of the receipt…open – snap – done! The receipt then sits waiting for us to process it into your accounts.
- AND HERE’S HOW ALL THIS HELPS YOU…
Not claiming the maximum amount of expenses you can just because you don’t have the receipts is pretty much a crime in our eyes…it’s needless and costly. Just remember, every receipt not claimed represents more money you have to pay to HMRC than you need to. Treat your receipts with the same respect you treat your pound notes.
And if your accountant keeps nagging you for receipts, you now know why…they want your tax bill to be as low as possible,
If you’d like to see if we can help you save a bit more tax, go to our contact form to get in touch with us.