Credit card receipts vs VAT receipts

Credit card receipts vs VAT receipts

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A client pays for everything through the bank account and submits on the whole credit card slips rather than VAT receipts.  He does his own VAT returns and doesn't claim VAT on the expenses where he only has credit card slips.  

I have told him that the whole expense could be disallowed without a proper receipt and he needs to get proper VAT receipts but he persists in submitting these credit card slips, am I correct?  He works away from home a lot and so the majority of the credit card slips are for restaurant bills.

Any advice greatly appreciated?

Replies (31)

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By johngroganjga
04th Jul 2014 10:30

Not sure what you mean by "whole expense could be disallowed". He doesn't claim the VAT unless he has a VAT receipt. What remaining risk do you think he is exposed to?

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Replying to Tom 7000:
RLI
By lionofludesch
04th Jul 2014 11:35

Just guessing, but

johngroganjga wrote:
Not sure what you mean by "whole expense could be disallowed". He doesn't claim the VAT unless he has a VAT receipt. What remaining risk do you think he is exposed to?

The credit card slips usually don't say what's been purchased.

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paddle steamer
By DJKL
04th Jul 2014 11:29

Does the OP mean more for Income Tax

It may be the OP means that whilst no vat is claimed these costs are claimed as deductions from profit but with only a credit card type receipt that merely says to whom and amount HMRC might , in the case of an enquiry, seek to disallow as no indication on the paperwork of what the expense was for.

I would certainly be less than happy with such a recurrent ongoing position, especially if the amounts in total were significant, as without detail one could not for instance confirm:

1. How many people eating

2. Location where eating (business name on c/c receipt might assist but not always)

If this surmise is correct I would strongly suggest, like the OP, that client  obtains more detailed receipts.

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By johngroganjga
04th Jul 2014 11:38

Possibly that's what the OP means - but if the expenditure is entertaining it's going to be added back in any event so whether HMRC are satisfied with the evidence doesn't come into it.

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RLI
By lionofludesch
04th Jul 2014 11:49

My inference is that it's for subsistence when travelling on business but I may be wrong.

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By JWB
04th Jul 2014 11:56

Thank you DJKL, yes that is what I mean.

The problem is that it is a credit card slip, i.e. no detail of what the expense is for, most of the slips are for restaurants and so give a business name and location and he says and confirms that these are for business meals / lunches some of which would be with clients I think.  but is a credit card slip enough to claim as a 'business expense'.  

Should a deduction be applied in the accounts for 'disallowable expenditure' but I don't know how you would put a figure on it, 

I tell him to collect proper receipts every year ... 

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Replying to vinylnobbynobbs:
paddle steamer
By DJKL
04th Jul 2014 14:09

Entertainment and subsistence

JWB wrote:

Thank you DJKL, yes that is what I mean.

The problem is that it is a credit card slip, i.e. no detail of what the expense is for, most of the slips are for restaurants and so give a business name and location and he says and confirms that these are for business meals / lunches some of which would be with clients I think.  but is a credit card slip enough to claim as a 'business expense'.  

Should a deduction be applied in the accounts for 'disallowable expenditure' but I don't know how you would put a figure on it, 

I tell him to collect proper receipts every year ... 

The client entertaining is certainly going to need to be disallowed within the tax return (added back) the out of town subsistence element is very much going to turn on individual instances/particulars so cannot readily be answered as a generic answer.Re foregoing I am presuming he trades as a sole trader and not via a limited company?

The catch you now have is how do you know which receipts cover both and how many covers?

As stated he needs more detailed invoices not merely credit card receipts.

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RLI
By lionofludesch
04th Jul 2014 12:01

Could be ...

It could be that he's one of those clients who won't take any notice until he writes out the cheque to HMRC.

I'm sure we've all got some of those.

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By HUGH W DUNLOP
07th Jul 2014 13:18

proper receipt

I would imagine that this situation may be covered by the Cheques Act which states that a paid unendorsed cheque is prima facie evidence. This act also obviated the necessity to put a 2 pence (yes it was pre decimilasion) stamp on many legal documents.

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Replying to James Graham:
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By lionofludesch
07th Jul 2014 13:33

Forty years

HUGH W DUNLOP wrote:

I would imagine that this situation may be covered by the Cheques Act which states that a paid unendorsed cheque is prima facie evidence. This act also obviated the necessity to put a 2 pence (yes it was pre decimilasion) stamp on many legal documents.

Over forty years on, many banks - perhaps most - still issue books with cheques in multiples of thirty.  That's five bob stamp duty.

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By CJaneH
07th Jul 2014 14:00

I am surprised nobody in the above comments have used the word invoice, a receipt is just an acknowledgement of a payment made/received. To claim business expenses invoices are required. Supplier name & address/goods or service supplied/ date supplied/customer name /VAT number.

 

Explain to your client what an invoice is and ask him to retain them, and ask for them if needed.

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Replying to lesley.barnes:
Stepurhan
By stepurhan
07th Jul 2014 14:14

Advisable v required

CJaneH wrote:
To claim business expenses invoices are required.
For a simple business expense claim (as opposed to an input VAT claim) this simply is not correct. If a business has genuinely had an expense then it is deductible for tax purposes. It is the expense being made for business purposes that makes it deductible, not the associated paperwork. You are not required to have an invoice for deduction to be allowed.

The reason why it is ADVISABLE to get invoices is that they serve as proof the payment actually was for business purposes. As many on this thread have said, without proper paperwork there is no way to tell if a bill is deductible subsistence or non-deductible entertainment. Credit card receipts are at least proof that a payment has been made at a time when the business would have needed to pay for subsistence. Similarly, if a business operates a vehicle then payments to garages are likely to have been for fuel to that vehicle. You might have to negotiate without invoices to back them up, but any accountant that includes no motor expenses for a client that clearly needs a vehicle to operate is doing that client a grave disservice.

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Replying to charliecarne:
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By CJaneH
07th Jul 2014 15:42

Invoices V receipts

 

The example that payment to a garage is likely to be fuel for a car is a poor example for a receipt alone being adequate.

A Service stations sell a wide range of goods, coffee, groceries, cigarettes, newspapers and magazines. This is an example of where an invoice really is advisable.

Also I have clients with diesel vehicles and I extract the wife's petrol.

 

 

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Replying to Cheshire:
Stepurhan
By stepurhan
07th Jul 2014 15:56

Not required then?

CJaneH wrote:
The example that payment to a garage is likely to be fuel for a car is a poor example for a receipt alone being adequate.

A Service stations sell a wide range of goods, coffee, groceries, cigarettes, newspapers and magazines. This is an example of where an invoice really is advisable.

Which is why I said "likely" rather than "certain". If a client is using a vehicle regularly, non-fuel purchases are likely to be a small fraction of the total. I see that you have then gone on to say that having an invoice is "advisable" though. Does this mean that you now accept that it is not , as you originally stated, required? If not, are you saying you would not put any fuel expenses at all for a client simply because of the possibility of the payments to garages including things other than business fuel?

Your example of extracting the wife's petrol is also flawed. If the wife also drives a diesel vehicle, then having an invoice won't tell you whether the diesel purchased went into a business vehicle or not. Even separating diesel and petrol is not perfect. I have dealt with several clients in the past that run diesel vans, but have petrol powered business equipment. Invoices won't tell me if petrol was bought for equipment or a private car. The amount bought at one time might be an indication, but I could know that without an invoice. 

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By buttinski
07th Jul 2014 16:32

Whilst stepurhan could well be correct ...

.... I am not sure why he is pushing the argument.

It must be better to have original invoices to support business expenditure.

The question of fuel and credit card slips is an old favourite - one business could use the 'proper' VAT receipt to make a claim and another business could use the credit card slip. 

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Replying to accountantccole:
Stepurhan
By stepurhan
08th Jul 2014 07:59

Why push the argument

buttinski wrote:
.... I am not sure why he is pushing the argument.
Because some HMRC officers will tell you invoices are required and attempt to disallow expenses where you don't have invoices. If agents start believing this, and spread this incorrect assertion widely, then that can only do harm to the interests of clients everywhere. I always warn clients that unsupported expenses are going to be harder to defend if HMRC challenge them, but that is not the same as saying I won't defend them if the client clearly has had to pay out a legitimate expense.

buttinski wrote:
The question of fuel and credit card slips is an old favourite - one business could use the 'proper' VAT receipt to make a claim and another business could use the credit card slip.
True, but such supposition are more the realm of HMRC than the agent. If your relationship with your client is so bad that you think they are lying to you in this way, perhaps it is time to disengage.
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Replying to GHarr497688:
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By buttinski
08th Jul 2014 10:43

So sorry stepurhan

As I suspect you know, that isn't what I am saying, but to anyone who genuinely misunderstood me - I apologise.

I was not making any comment on my relationship with my clients, but I would be doing them a disservice if I did not tell them what they should be doing in order to have a quieter life, should HMRC 'ask the question'.  What is easier 'produce the invoice' or go through your argument that one isn't necessary? 

Also, it is not necessarily a case of 'dishonesty' - mistakes will happen, but they are less likely if good habits are practised from the start. 

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By HUGH W DUNLOP
07th Jul 2014 21:20

Forty years

But legal documents, with very few exceptions, do not need a postage stamp, but may well require an impressed company stamp. Older solicitors still stamp documents simply for the reason that old habits die hard.

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By Roland195
08th Jul 2014 10:33

Overly cautious

In my opinion, being so overly cautious/strict with the claiming of expenditure is not realtistically in the best interests of your client.

What do you do where a client buys a £500 laptop from PC World for instance? The amount exceeds the reduced information limit so a full VAT invoice is required but obtaining this would be a futile long term relationship with a phone menu. Do you really advise the client not to claim the £83 VAT on the off chance that HMRC make an issue of this?

No client has perfect records. It is the nature of paperwork, particularly receipts to go astray (go through the washing machine, used to dispose of chewing gum etc) and it would seem a poor accountant who does not try to sensibly bridge these gaps.

 

 

 

 

 

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Replying to GHarr497688:
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By buttinski
08th Jul 2014 12:36

Doing the best we can

I am not sure that anyone has suggested not claiming the expense just because there isn't an invoice.  I think most (the very vast majority) would 'bridge the gap' - what I am saying is what is better - to have an invoice or not to have an invoice?

End of contribution.

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By Jeremy.t
09th Jul 2014 12:25

itemised vat receipt

My garage(s) give, if requested, an itemised vat receipt which breaks down the petrol/diesel in litres and cost and itemises any other costs.  From a company perspective we expect to see such a receipt if an employee is claiming expenses.

It is always best to get as much supporting evidence as possible, sometimes you have a basic receipt and if all you ever have are basic receipts then HMRC can and will challenge you, but if the norm is a vat invoice or receipt then they tend to accept the odd un-itemised document for expenses, vey pragmatic unless they think you are taking the mickey.

 

PS £500 laptop from PC World - yes they will give you a vat receipt and yes you should ask for it.

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Replying to towat:
RLI
By lionofludesch
09th Jul 2014 13:34

Is it .... ?

Jeremy.t wrote:

My garage(s) give, if requested, an itemised vat receipt which breaks down the petrol/diesel in litres and cost and itemises any other costs.  From a company perspective we expect to see such a receipt if an employee is claiming expenses.

Is it a receipt ?  Or a "less detailed tax invoice" ?

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Replying to Mickey Jupp:
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By Jeremy.t
09th Jul 2014 14:16

Suppose it depends on your definition of the term invoice!  But the important thing is the detail in the document.

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By Carolynne
09th Jul 2014 14:21

Only under £20

As far as I have ever known, the expense can be allowed if you have no receipt but it is under £20, but even I would not be happy if a client had EVERY under £20 receipt missing.

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By Romi_74
31st Jul 2014 15:03

Depending on the type of supply

Let's look at the recycling world for a second, waste that is collected from businesses for which they receive a payment. The supply is detailed and documented by a collection statement but because the supplier is not VAT registered doesn't want to be burdened by the administrative task of issuing an invoice (and we do not want to start Self-Billing). We account and pay for the supply of the waste without an invoice. Could HMRC disallow the deduction of these transactions from the Taxable Profit? We are talking about a large chunk of direct costs for us. Many thanks.  

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Replying to johnhemming:
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By Jeremy.t
31st Jul 2014 15:13

No VAT to reclaim?

Romi_74

From a basic viewpoint; the supplier is not Vat registered so is not charging VAT so you cannot reclaim any VAT. 

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Replying to johnhemming:
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By Jeremy.t
04th Aug 2014 11:19

paperwork is best

Generally speaking the more paperwork you have the better.  If there is no paperwork - invoice/supply note/bank payment evidence - then HMRC are going to be very suspect, the more you have the better.  The onus is on the company to maintain 'proper/adequate' records.  If you have collection statements I should think that would be sufficient, if not the worst that is likely to happen is a HMRC advisory that you need to improve your record keeping.

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By HUGH W DUNLOP
31st Jul 2014 15:39

JWB
 I have told him that the whole expense could be disallowed without a proper receipt.No expense should be allowed without a receipt and confirmation that it is a legitimate claim. Would you be prepared to write to HMRC stating that you doubt the validity of the claim, have no idea of what it was for, but lntend to allow it anyway?

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By Romi_74
31st Jul 2014 15:45

I'm thinking about Corp Tax,


Sorry, should have clarified, I'm thinking about Corp Tax, not VAT.

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By HUGH W DUNLOP
01st Aug 2014 16:22

Corp Tax, not VAT.

Do your clients expect you to think on your feet and not get confused.

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By Romi_74
04th Aug 2014 11:00

Do your clients expect you to think on your feet and not get con


Well that is helpful, thanks.
I personally thought that my question was fairly clear as I have mentioned the deduction of taxable profits, not VAT, I was asked to post this question to this thread by another member after initiating my own discussion. Sorry for interfering.

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