if items are paid out of the business account do you need receipts for them for them to be posted into the accounts as a business expense?
ie £12 spent on stationary in WHSmiths. Can you just post it direct to the stationary code or do you need to see the receipt?
If there is no receipt and it cannot be claimed as a business expense without a receipt - what do you post it to? Directors loan account?
I know it is a daft question but i am having a moment of self doubt.....
Replies (17)
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How do you know that
the payment was for stationery and not something of a personal nature?
No but....
The payment is from the business account. Unless you have reason to believe it is a personal expense, then it is not unreasonable to assume it isn't. If you look at every receipt for every payment on every client, you are going to struggle to make a profit This is assuming you are preparing year end accounts and not doing the client's book-keeping.
But there is always the risk that something is personal. If there are only a few payments then checking them all may be feasible fairly easily anyway. Restricting checks to items more likely to be personal is a halfway house. Otherwise a query to the client confirming there are no private expenses from the business account is probably prudent at least.
At the end of the day, you are their accountant, not HMRC. Being perpetually suspicious your client is trying to put one over on you is not a good working relationship. If you've done your job in telling them what is and isn't allowable then, unless given reason to think otherwise, you should trust that they have taken that on-board.
Also, a receipt won't necessarily answer the question anyway. A pad and pens purchased for work and a pad and pens purchased for doodling on at home look the same on a receipt.
Stationary ? Eh dear .......
At the end of the day, you have to rely to some extent on the client's honesty.
To state the obvious - if you don't know what something spent by the client was for - ask him. It's not difficult.
Ask the client
Yes but you say your point is that you don't know whether it was stationery for use in the business, or for purely personal use, or a bit of both. So if the documents don't tell you which it is ask the client.
The accounting follows the nature of the expense. Until you know what it was you won't know how to account for it. No-one on AWeb can help you as we are not clairvoyant, and don't know who your client is.
Be prepared for the client to be affronted when asked to confirm whether a payment for stationery out of the business account was for business or personal purposes.
Any training
Have you had any sort of training in book-keeping? Because someone charging for book-keeping will come across missing receipts a lot. You're going to struggle with more difficult things if a question like this stumps you. I hope you aren't charging at an hourly rate if you are going to spend huge amounts of time over this small an expense.
You say that you know what it is for (though you keep mis-spelling it. I presume they haven't paid for remaining still) so what is the problem> If you know it is for stationery then just post it as that. To do otherwise is to basically say you don't believe anything the client says without seeing independent paperwork. Like I said earlier, not a good business relationship. Unless you are only saying you "know" because it is WHSmith, in which case you could just try asking if you are that worried. Again, I suspect asking about every tenner he spends will soon find you not doing the book-keeping anymore.
Quality
(though you keep mis-spelling it. I presume they haven't paid for remaining still)
Fair point
While you are at it why don't you correct my grammar? its pretty shocking.....
Fair point - and very well made. We could look at punctuation too. There are three errors in the above quote.......
More seriously, I often gloss over difficult to read posts. If you want a response, make your post reader friendly - that'd be my advice.
My bookkeeping training tells me I should have a receipt for everything I post. My work experience in industry tells me that this is not necessarily always the case. I suppose I just wanted some reassurance that it was ok to post these small sums without the receipts. I understand that you say it ultimately boils down to being the owners responsibility, however, if I am the one who has entered the figure does that not actually make it my responsibility?[
No, of course not. Whoever signs the returns - whether that be VAT, SA or CT takes the responsibility.
By the way - when was the last time you did any bookkeeping - if ever?! I am just doing a favour for a friend and I just wanted to make sure I was doing it right.
I do bookkeeping on a regular basis. I find it a gentle relaxation.
A favour?
I agree. While you are at it why don't you correct my grammar? its pretty shocking.....
I also think it matters in a professional context, because poor spelling and grammar give a bad impression to the recipients of contact. These things matter, and it irritates me when those posting in a professional forum can't be bothered. If you really don't think it matters, feel free to ignore my comments on this.
This week. We are a small practice so I have to get hands-on with client work from time to time. By the way - when was the last time you did any bookkeeping - if ever?!
Let's be clear. I am just doing a favour for a friend and I just wanted to make sure I was doing it right.
If you deny deduction for legitimate business expenses without a good reason, you are not doing them a favour. If it's a business expense, then it should be claimed.
If you treat someone as lying about an expense being for business unless they have independent proof, you are not doing them a favour. Unless you have reason to believe otherwise, you should take a client's word. By all means warn them that, without invoices/receipts HMRC may take a different view. However, if they run a van but never keep the fuel receipts, do you really think HMRC is going to insist they must have been running it on air by denying ALL fuel expenses?
If you have so little real-world book-keeping experience that a common problem like this throws you, you are not doing them a favour. This is a basic question that anyone with real-world book-keeping experience should be able to handle. If you can't then the real favour would be to pass them on to someone who can.
My advice
I start on the assumption that you trust the client otherwise you would not be working for them.
Accept payments from credit cards and bank statements as business expenditure unless it is clear that they are of a personal nature.
Set a limit on the amount and agree with client that you will not reclaim vat on any expenditure of say £100 without a receipt.
Review the volume of expenditure without receipts and discuss with client the need to retain all receipts.
In my view we are working for the client and it is not cost effective for the client if a book-keeper
spends time hunting down every single receipt.
The only thing I would disagree with
is not claiming the VAT back without a receipt. Yes, it is better to have a receipt/invoice but it is not essential. Being able to prove an entitlement to input tax recovery is the important thing.
You should warn the client that a VAT inspection might result in questions being asked if there is no receipt, so (try to) ensure that a receipt is both obtained and retained in future.
It could save a lot of trouble in the long run.
For completeness
It's worth saying that, for certain expenditure items of up to £25, input tax can still be claimed without a receipt or invoice, e.g payphones and vending machines. Notice 700 has the details.
It is a shame that I keep seeing rude and somewhat intolerant comments on AW. Bottom line is this is a forum for people to ask questions they need help with and for people to try to help if they think they can. There's no requirement for people to self-vet their questions first to check if they should know the answer already etc. There is always the option of not responding.
I have an observation borne of over 25 years of working alongside accounting types - there are a fair number of curmudgeons and Victor Meldrew types per head of population than normal.