I'm currently using different software - can I change to QuickBooks Online?
Absolutely! We can help migrate your data from your old accounting software package to QuickBooks Online. QuickBooks Online fully support this, with a dedicated migration team. Two financial years of data can be migrated to QuickBooks Online free of charge.
If I scan my receipts, do I have to keep the paper copies for HMRC?
The good news is that, in most cases, HMRC will accept scanned copies or photos of receipts, and you do not need to keep the original paper version.
The exception to this is for those documents that show tax that isn't VAT (eg bank interest certificates or dividend vouchers). These need to be kept in their original form - so if received in paper format, you will need to retain that paper.
When scanning / photographing receipts, remember to include the back of the receipt if it has information on the back as well.
Ensure that you have a good backup service, as HMRC require you to retain your records for a number of years.
The exception to this is for those documents that show tax that isn't VAT (eg bank interest certificates or dividend vouchers). These need to be kept in their original form - so if received in paper format, you will need to retain that paper.
When scanning / photographing receipts, remember to include the back of the receipt if it has information on the back as well.
Ensure that you have a good backup service, as HMRC require you to retain your records for a number of years.
Do I have to register for VAT?
A limited company must register for VAT when it's taxable turnover is, or is expected to be more than £85,000 for a 12 month period. A business can voluntarily register for VAT if it suits the business financially - it would be able to recover VAT on VAT taxable business expenses (as long as you have the receipt) and it may give a more professional impression. However, VAT would need to be added to invoices raised, and so your total charge to clients would increase.
What are the responsibilities of being VAT registered?
- Charge the correct amount of VAT - currently 20% but you must be aware if this changes.
- Keep VAT records and a VAT account - from 1st April 2019 this will all be done on line using MTD software (QuickBooks Online is MTD compliant).
- Calculate and submit your VAT returns quarterly.
- Pay your VAT bill to HMRC (by the deadline shown on the completed VAT return).
How do I reclaim VAT on my business expenses?
On average, UK businesses miss out on 54% of the VAT they can reclaim on travel and expense costs (Vanson Bourne, 2017)!
Employees will pay VAT on many business goods and services that they purchase and then expense to the company. If a business is VAT registered, much of the VAT paid on expenses can be recovered, which gives businesses an opportunity to recover cash. However, the correct procedures must be in place, to satisfy HMRC.
Many business fail to track the VAT paid correctly and under claim or do not keep the correct records required to support claims, which can often lead to claims being refused.
Taxis - VAT on taxi fares can be recovered, which is normally a standard rate when charged. The main difficulty is that often taxi receipts do not specify if a charge includes VAT and some self employed taxi drivers may not be VAT registered, so do not include VAT on the bill. It is always best to ask your employees to request a VAT receipt when travelling via taxi.
Vehicle Mileage - When an employee uses their own vehicle for business use, the business can reclaim VAT on the fuel expense claimed by the employee. The business must make sure that a VAT receipt is supplied for each fuel expense covering the VAT to be claimed, and an accurate travel log is recorded, including start and finish location of journey, who was visited and for what purpose, date of journey and mileage. Only VAT on the fuel element of the expense should be claimed (not wear and tear, insurance, road tax etc). Further information on fuel rates is on the HMRC website here.
Public Transport - Most forms of public transport (buses, trains etc) are zero rated, so no VAT would be reclaimable against these.
Hotels and Restaurants - These are normally allowable to be reclaimed, however employees taking clients out to dinner is classed as business entertaining, which isn't reclaimable. In addition, individuals / companies acting as contractors do not count as employees, and so their expenses are not recoverable (unless they recharge the company including VAT).
Employees will pay VAT on many business goods and services that they purchase and then expense to the company. If a business is VAT registered, much of the VAT paid on expenses can be recovered, which gives businesses an opportunity to recover cash. However, the correct procedures must be in place, to satisfy HMRC.
Many business fail to track the VAT paid correctly and under claim or do not keep the correct records required to support claims, which can often lead to claims being refused.
Taxis - VAT on taxi fares can be recovered, which is normally a standard rate when charged. The main difficulty is that often taxi receipts do not specify if a charge includes VAT and some self employed taxi drivers may not be VAT registered, so do not include VAT on the bill. It is always best to ask your employees to request a VAT receipt when travelling via taxi.
Vehicle Mileage - When an employee uses their own vehicle for business use, the business can reclaim VAT on the fuel expense claimed by the employee. The business must make sure that a VAT receipt is supplied for each fuel expense covering the VAT to be claimed, and an accurate travel log is recorded, including start and finish location of journey, who was visited and for what purpose, date of journey and mileage. Only VAT on the fuel element of the expense should be claimed (not wear and tear, insurance, road tax etc). Further information on fuel rates is on the HMRC website here.
Public Transport - Most forms of public transport (buses, trains etc) are zero rated, so no VAT would be reclaimable against these.
Hotels and Restaurants - These are normally allowable to be reclaimed, however employees taking clients out to dinner is classed as business entertaining, which isn't reclaimable. In addition, individuals / companies acting as contractors do not count as employees, and so their expenses are not recoverable (unless they recharge the company including VAT).
What Can Contractors Do About IR35?
If you are a contractor operating through a limited company, HMRC may ask for evidence that you are genuinely freelance, and not an employee of your client. Here are some examples of how you can make your case:
- Try to have multiple clients at the same time. If your time is split relatively fairly between at least 2 clients, then it is difficult to say that you are an employee of either of them.
- Do not name your business after yourself. This highlights that it may be a Personal Services Company.
- Highlight how your work situation differs from the employees - no minimum hours, no pension arrangements, no stipulation on where or how the work must be carried out.
- Keep evidence from the client stating that you are not under the control of a manager at the business.
- Have your own office (home office is fine), with own marketing and own business insurance.
- Keep up with professional subscriptions, memberships etc.
What if I've lost my receipts?
HMRC says that there should be 'sufficient' evidence for all expenses and income on the tax return. 'Sufficient' is a bit vague, but generally, showing the item on a bank statement or credit card should be sufficient. The problem is bigger if you keep losing receipts, especially if high value. In which case they may want to investigate.
Some amounts can be estimated though - eg petrol. If you can show the mileage on the vehicle, then you can estimate this over the year.
If you are VAT registered, then all expenditure items should have the corresponding VAT receipt attached, if you wish to reclaim the VAT, but again if you've lost the receipt, you can use other evidence.
Going forward, regular monthly bookkeeping in QuickBooks Online - which allows scanning of receipts and invoices directly - will put your mind at rest from it happening again.
Some amounts can be estimated though - eg petrol. If you can show the mileage on the vehicle, then you can estimate this over the year.
If you are VAT registered, then all expenditure items should have the corresponding VAT receipt attached, if you wish to reclaim the VAT, but again if you've lost the receipt, you can use other evidence.
Going forward, regular monthly bookkeeping in QuickBooks Online - which allows scanning of receipts and invoices directly - will put your mind at rest from it happening again.