Claiming Expenses

Claiming Expenses

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Hi

Are there any rules as to what % of turnover can be claimed as expenses when clients have not retained their accounting records? I have a acquired couple of subcontractor clients in the CIS industry who are in such a scenario. There are very few records. On the income side, there are statements of earnings, but for expenses, there are very few. As this area (CIS) is quite new to me, not sure how to go about this. I have heard from some other practitioners that you can claim expenses of up to 10% without supporting records, and between 10% and 20% if client gives you assurances (written/verbal) that supporting evidence are available if required  and between 20% and 30% if there are full records. Are there any supporting guidelines on this or is it just arbitrary?

Can somebody please point us to relevant guidance if there are any? If anybody has experiences of this and whether HMRC have come back to them regarding the same, it would be helpful information.

Many thanks.

Replies (6)

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By Tosie
30th Mar 2012 09:06

how I deal with such a situation

Confirm travel arrangements making sure that the main contractor does not provide a van with fuel. I then work out mileage and check out distances and time away from home. Do they stay overnight or travel daily.

I then claim cleaning of overalls. There is a agreed rate on hmrc for protective clothing and tools.

Are they required to have a mobile phone if so who provides.

Any clerical work done at home.

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By andrew.hyde
30th Mar 2012 12:03

Clerical work done at home

Such as keeping records?  Perhaps not.

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By Tosie
30th Mar 2012 12:46

andrew

I needed a laugh.

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By JoD
30th Mar 2012 14:18

Agreed rates

Tosie

I thought the agreed rates (fixed rate deductions) were for employed workers. Do they apply to self employed as well?

With regards to claim for expenses as a % of turnover, is anybody aware of any HMRC guidance?

Thanks.

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By fpurves
30th Mar 2012 14:48

The difference between " can" and " should"

Hi JoD

Have you considered that the reason there are no records of expenses because " there actually" were none!!  And that if you happily include a round sum % you are helping them to falsify their tax returns...oooops!

If you can establish that there was tax deductible expenditure incurred in the process of conducting their trade then my advice would be with Tosie in that you should prepare an analysis that calculates a reasonable and best estimate of the expenses actually incurred.  If you are concerned in any way - white space a comment that full back up is not available but best estiamtes have been calculated using the knowledge you have of the business and its expenditure.

  In addition I would also remind the client of that as they are self employed they must keep appropriate records ( e.g. even if this is just a whole envelope of petrol receipts as some form of back up of business travel).

A final piece of advice is to take care when you here the words " I have heard that other people claim between  X% and Y%".  Generally these are "pub accountant" comments ... and listening to them or worse accepting then as gospel is the start of a very bad slippery slope. 

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By cheeeetah
30th Mar 2012 17:37

CIS is separate from expenses, far as I can see.

{And 'Expenses' are: his expenses from the company for doing the job (train fare/mileage), and company purchases for the company (Paper, Ink, etc).}

My suggestion is to ask them if there were any expenses s/he would like to claim.  Give some idea of the kind of things that he could claim for in his/her situation (eg home office), and see what s/he lists out.  Then, try to evaluate those that you can.  eg, if he needed a computer and bought one for his company, there should be a credit card note of it, etc.  If he has business miles (rather than commuting to the place of work) he might have records of when/where etc.

However, your hourly rate is running up to save a few pennies from the taxman.  Maybe it's not worth it and you would be better just working with what he gave you.

 

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