When you run your own business it is really important to keep on top of the financial paperwork. There are so many rules and regulations to check to ensure that your records are compliant. We thought it would be handy to give you a quick reminder about receipts and expenses understanding what you need to keep and how long to keep them.
What is a business expense?
The word ‘expenses’ in a business is used to describe a number of different types of cost. Most business expenses can be reimbursed in some way.
Do you have to keep receipts for your business expenses?
For businesses and those that are self-employed, HMRC requires you to keep hold of your business’s receipts as part of your business records. These receipts don’t have to submitted themselves when you file your tax return, just stored safely should there be an inspection.
For everything that you reclaim as an ‘allowable expense’ when filing your tax return you must have a receipt. New accounting systems are making this much easier with the scanning facilities and electronic filing rather than the old fashioned boxes of paper receipts. The newer systems are also much more efficient when it comes to searching for payments by date and by business name
For capital assets you should also keep records for all items you have purchased, for as long as you have the asset and for at least six years after you sell it.
HMRC say that you must keep these receipts, but they also help you fill in your tax return accurately and will be vital if you ever need to show your accounts to a tax inspector.
If you’re unsure about what records you should be keeping for your business, the team at Contador Accountancy will be able to help.
Which business expenses should you keep receipts for?
If you’re a sole trader or partner in a partnership, you can deduct ‘allowable’ expenses from your business income when working out how much taxable profit your business made during an accounting period.
You should keep the receipt for anything you’re planning to claim back as an allowable expense.
Allowable expenses include:
office costs (including premises costs, such as heating)
clothing expenses, such as uniforms
financial costs, such as insurance
HMRC provides a full list of allowable expenses for the self-employed on its website.
How long should you keep your receipts?
HMRC requires you to keep financial records for your business for at least five years after the 31st January submission deadline of the relevant tax year.
You don’t have to include your receipts with the tax return that you submit to HMRC, you must hold on to the receipt either a paper copy or a digital copy for at least five years in case of a tax inspection.