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Tax return for a taxi driver

I volunteered to help a taxi driver with his tax return. It has been a while since i did an incomplete records job so I am looking for help.

He started in feb this year and prior to that he was employed as a courier.

I foresee the following potential problems

- he didn't get a p45 or p60 from his previous employer and they keep saying they have sent it. He has only some pay slips. Can he get a copy from hmrc?
- all his takings are cash, he says he has records but I am not sure how good they will be. How best to calculate his income?
- he has receipts for petrol, car and radio hire but not things like parking, mobile phone and car wash. Is it ok to put reasonable estimates in for those items with no receipts?

Any advice and tips on how to deal with a client with incomplete records would be really appreciated.

Thanks in advance



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15th Sep 2012 10:06

taxi driver

Hi Richard, if you act as tax agent and have a form 64-8 with HMRC you can request a copy of the P45. If you are not registered with HMRC the client will need to call and get it sent directly to his address. The totals for the year should accord with the final 2011/12 payslip (assuming you have that).

Normally I find that taxi drivers keep a notebook/diary of takings so you know what days they worked during the year. One of the things to check is to look at the petrol expenses in relation to the takings and ask yourself whether the gross profit percentage looks reasonable. You are mainly reliant on him keeping decent records for takings and tips etc.

If he has put on his takings sheets destinations like airport runs there maybe scope to include parking even though he may not have kept the receipts. He may need a slap on the wrist and reminded that it is still a legal requirement to retain documentary evidence in case of HMRC enquiry.

Does he use the taxi/car for private use? If so there may be a motor expenses disallowance.

Hope the above helps.


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16th Sep 2012 20:05

Hi Jonathan

Many thanks for the advice above, it has certainly helped.

Good point on the private use. I will check with him on that. If there is private use, would you disallow a proportion based on mileage or is there another recommended way?

The taxi driver is self-employed for the first time. I am thinking it could be advantageous to both of us to make it clear from the start that he is responsible for what goes on tax return, I am just helping him to prepare it. Is this the right approach? I think it will help him to be totally honest about income / expenses which would be in both our interests.What do you think?


Thanks again


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By eve2206
17th Sep 2012 01:35

I would calculate his private element on a percentage basis. However, this is just me, I would also view it from a tax office angle eg are all the figures reasonable for the hours worked, the city he works in etc. a black cab driver in London will differ from a mini-cab drriver working in the sticks etc. most, if not all, reputable cab firms operate a fixed mileage rate now and this should reconcile to some degree to the miles he claims were working miles.


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18th Sep 2012 11:48

Thanks for the advice Eve, much appreciated

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20th Sep 2012 06:51

Hi Richard

Yes that sounds fine and I agree with Eve regarding using a private use percentage basis.

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21st Sep 2012 11:09

Statement of earnings

Write to the courier co asking for a "statement of earnings" which should detail gross salary and all deductions. In terms of income it depends on how honest the guy is. If he is honest ask him what his ave earnings are but there will still be an element of working backwards. What r his expenses, what does he need to live on, etc. and build it up that way. Get him to sign the tax return and working papers so you don't leave yourself open.

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21st Sep 2012 11:58

Dont forget tips

Just about all taxi drivers receive tips and these should be recorded and included in turnover.  If not recorded an estimate of around 10% of takings is probably reasonable.

If records incomplete and you have doubts about figures given get him to give you details of his annual mileage, private mileage, estimated engaged mileage (miles travelled with meter on, normally no less than 50%), length of average journey and a copy of the council fare tariff (things like MOTs and garage invoices usually give mileage details).  Once you have this information it is a relatively straight forward calculation to check that the income returned is reasonable.

Regarding unvouched expenses I would suggest that he should obtain receipts from now on and that you use these to estimate expenses for the earlier period.  Everything being equal after a couple of months this should give a reasonable basis for an estimate.

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By enanen
21st Sep 2012 12:10


I would start with his global expenses on a personal level and see all bank statements and credit cards to establsih how he ran his life and domestic income, reviewing start and end savings and loans position of each year.

Starting with what they perosnally trolley through in a year is the best way

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Kinda close...

I do the books for a freelance truck driver.


Something that I say time and time again is that I can write down whatever he wants but if its not legal then HE is responsible for it. Too many times he's asked me to add items in that are either personal and/or not relevant to his job.

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By Tosie
21st Sep 2012 14:55

business economic notes

On HMRC site there is a model for a tax inspector reviewing a taxi drivers accounts.

One thing is worth looking at is the time he buys his fuel as he will earn more as a night driver.

Other point is if he owns the taxi does he have a "night man" i.e. does he hire the cab to another driver.

Agree with enanan never do an incomplete records job without undertaking that exercise.

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21st Sep 2012 15:25

Analytical Review

I always conduct an "income per mile" calculation to check the reasonableness of the income in relation to costs.  I estimate an average fuel price per litre and convert to gallons and factor in an estimate MPG for the vehicle to determire the ratio of income per mile travelled.

I have found this a very powerful technique

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21st Sep 2012 16:21

Taxi driver
Once again there appears to be a generational gap. Richard, are you really a qualifed accountant with a practising certificate? If your lack of knowledge apparently evidenced by your letter, suggests that you should not touch this type of client except and unless you have first had a few lessons from a kind professional colleague.

As to the comment I just write down what he says.Wow! Have you not heard of money laundering? Also if HMRC get a whiff of this as your usual practice, you may expect a blitz on your clients.
There are tried trusted and reasonably efficient ways of safely dealing with this type of client. Learn them.

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"write down what he says..."

I think I may not have been clear, What I meant was IF I was to right down whatever he said and it went tits up then he'd be the one in trouble. Just saying no doesn't seem to work with this kind of client so you need to phrase it such a way that THEY decide not to go down that road and so don't lose face.

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22nd Sep 2012 14:49

Most business men will keep receipts for expenses as they want to claim relief but their  takings records are generally poor, for a variety of reasons. .

I would analyse these and make particular note of petro/diesel receipts and extracct from this, number of litres on each fuel receipt to establish milage travelled in a year. Most people pay fuel using their credit card and credit card statements should provide cost of any missing fuel receipts.  .

Look at MOT certificates between two periods to establish the milage at the start of the year and at the end of the year. Receiipts from car repairs will also provide details of milage between services. This will give you milage travelled in a year. Establish his private milage based on his travelling time bettween home and work, his shopping trips and other private miles while he is not working.. The balance will be his business miles. Check your results against milage per fule receipts based on avg milage his vehicle will do per litre of fuel.

From this I would prepare a cash account building into it bankings into his private account.

Invariably you will find a Dr balance on the cash account, which I would treat as unrecorded takings.

I would then do a means test to establish whether what has been declared as net income ties up with his standard of living.

Its trial an error until your the figures look reasonable.

There is a realation between fuel usage and takings. You can establish takings based on amount charged per mile by the taxi company he works for

Taxi drivers are not know for keeping good records and I for one try and avoid this kind of work as I do not wish my reputation to be tarnised by such a client base.

 Hope this helps















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22nd Sep 2012 17:14

tyres, plates and runninhg round empty.

I quite agree with nghelani.    It's two years since I retired from public practice, but nice as most of our local taxi drivers are nowasdays, my most traumatic experiences 20 years ago concerned  this trade, and i eventually refused to take them on. I would keep clear of them if I were you.


1.   One ratio I haven 't spotted above is tyre usage- The Revenue (when they were called that) compared mileage with tyre replacement. " You get through a lot of tyres Mr Moss?"


2. Don't claim AIA on plates. ((FYA in my day) They are licenses to trade, not  piece of plant.


3. Be prepared to justify the ratio's of engaged mileage to  empty mileage (ie going to pick up a fare or after dropping one. " "Car 10 picked up, over" means car 10 didn't go home empty.

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