When you are a self-employed individual and carrying out your business activities, you realise how imperative it becomes to keep receipts for taxes. This helps you at the time of tax returns, however, some people still wonder about the receipts record usage with the tax matters. The receipts of any little cost or expense that is related to your business activities are useful to keep.
Whether you aim to buy a computer table to avoid working on home shelves, the expenses of a cab that you took for the purpose of a business meeting, or the cost of a coffee that is bought for a business meeting for the client. All these details should be part of the record by having receipts. This will keep you aware of the fact that how much money you have spent on the little expenses and even if you have not provided the details to HMRC, they will get it anyway at the time of audit.
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Receipts for Taxes – Why Do I Need to Keep Them?
It is wise to follow the instructions of HMRC as they suggest keeping a record of receipts that is related to your sales and other business expenses. The possible details could include the following listed options:
- Receipts of expenses
- Takings of personal income
- The record of staff – PAYE
- The records of VAT
- Bank statements
- Other invoices
Moreover, if you are still in doubt whether a receipt will be useful during the process of tax returns and other tax affairs, just keep it intact as a part of the record. As you never know how much will it help you in any unsorted matter of tax. Mostly the receipts are digital these days so you can maintain an online record easily, however, if you want to maintain a record of physical receipts that will be helpful too.
The experts recommend maintaining an online record for the sake of a less time-consuming process. If you have a physical receipt, you can scan it to maintain the online record. Ensure to keep it a legible thing and then there will not be harm in destroying the physical receipts.
What is the Required Period for Keeping the Tax Receipt Intact in the Record?
In the case of being a sole trader and carrying out your business activities on your own, there is a period of five years that is recommended for you. However, for the owners of the limited companies, this receipt record has to be intact for a period of six months. Generally, you will have to keep the record intact indefinitely as this can keep you safe from any enquiries at the time of audit from HMRC. These days the backup maintained in the hard drives is a lot easier to handle rather the piles of overloaded paperwork.
A lot of people who are associated with the business world tend to keep the record for a very long time even more than what is recommended. Generally, this will keep you protected from so many factors because HMRC is able to audit or call for an investigation over your records for 20 years if they suspect any kind of tax avoidance. Whether you are being investigated in the present, investigated in the past or have chances of this in the future, you are suggested not to discard anything related to your records on a permanent basis.
Can I Claim Expenses on the Basis of Tax Receipts?
If ever in the business period you aim to claim for business expenses, you are generally not asking for the submission of receipts. However, HMRC can enquire and ask for anything so the best is to keep yourself on the safer side and not to discard the records on a permanent base.
Moreover, when you are aware of the facts that include the details of the bank transaction, the value of the product, and the time of purchase, there will be no requirement for a receipt. Always go for an expert’s advice if you are doubting anything in the process.
Tax Purpose and the Tax Receipts – What is the Relation?
As a reminder, you need to keep everything as a record for a safer period of time and maintain a backup as well. Because no one wants to feel sorry for any such act of discarding the records. When it comes to the matter of tax, HMRC tends to give a very slim margin. So you need to keep yourself over-prepared for anything in the process rather than being unprepared. If you still have doubts, reach out to an expert immediately and learn the importance of different factors in the tax process.
In case you undergo any investigation, you will be ready for any record to be checked and deal with the process more professionally and confidently. If you have all the records ready that they can ask for, there is no need to worry about the investigation process.
The Bottom Line
Now that you have gathered a fair amount of information about receipts for taxes, we can say that there is no doubt that good maintenance of records will keep you safe at the time of tax returns and sudden calls for an investigation by HMRC. So it is wise to keep everything in the backup rather than discarding. For this purpose, online records are the best way to maintain. We hope these few minutes of reading will help you to develop a better understanding and you will handle the record of the receipt in a professional way.
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Disclaimer: The information about the receipts for taxes provided in this article includes text and graphics in general. It does not intend to disregard any of the professional advice.