Making business purchases from private sellers?

Business expenses are normally purchased from other businesses who provide a receipt or invoice...

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Hi everyone,

Tax deductible business expenses are normally purchased from other businesses who provide a "professional looking" receipt or invoice. How do I go about making tax-deductible business purchases from different types of private sellers? That is, without raising eyebrows...

I can of course go about asking the private seller for a handwritten or typed up receipt, but even this isnt always simple as it may seem. For example, if I make purchase from eBay, I get a printable confirmation email of the date of purchase, amount paid, and a brief description of the item (sometimes the brief headline description isn't even great), but it doesnt actually always display the name and address of the seller (it shows an ebay username, and occasionally an address dpending on wether the user has chosen to publish this). It's a similiar scenario with purchases from Amazon sellers, whose addresses aren't shown on the "order confirmation email". I wonder if the lack of address and real name of private sellers not being on "email purchase confirmations" ever causes an issue? In the case of Ebay and Amazon purchases, it would be pretty hard for HMRC to argue that the described purchase did not take place. And in most (but not all. eg. collect in person /cash only) cases there would be a electronic transaction / transfer to back this up (eg. Paypal, Bank transfer to Paypal, payment card trasfer to paypal, or credit/ debit card purchase).

But what if the purchase was made from a private seller on Gumtree? It is of course very normal for these sellers to expect cash as they do not usually have the ability to process card payments. And by accepting a PayPal they actually put themselves as significant risk, of having the transaction reversed by unscrupulous buyers who would exploit the "Paypal buyer protection" which favours buyers over sellers. In this scenario, a handwritten receipt could of course be provided but would the fact that it is a cash transaction without any "third party email confirmation" cause any issues?

And finally, if a cash transaction with a hand written receipt is all that is needed to satisfy HMRC, then what about a private sale from a friend to your business? Would there be any benefit to make this transaction electronic, from you business bank account to your friends account? After all, if it is a cash transaction with handwritten / typed up receipt, what is to stop "friends" increasing the figure on the receipt in order to reduce the profit of the business? Can HMRC reject a business expense on the basis of it being too expensive?

Of course, the reason why I am making these queries is that more often than not goods are often available on ebay and especially gumtree for far less than the normal RRP of a product. Quite often, these items are new and / or unused (eg. unwanted gifts, clearance stock). It would be a shame if there wasn't a way to take advantage of these lower prices without raising undue suspicion. I would love to hear from any tax professionals on how HMRC treat these transactions in practice, and what can be done to make these transactions in a way that would cause the least issues with HMRC.

 

 

Replies (8)

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RLI
By lionofludesch
08th Dec 2017 07:48

I've a client who buys second hand stairlifts.

He's produced a form which the seller signs, name and address, price, date, etc etc.

If you're buying from eBay or similar, print off (or save) the description, including thed price. Should be good enough, I would've thought. Provided it shows up as bought by you on your eBay account. obviously.

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Slim
By Slim
08th Dec 2017 07:55

A hand written receipt with the standard info should be sufficient. We get amazon invoices, although I don’t know how as I don’t do the ordering.

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Replying to Slim:
RLI
By lionofludesch
08th Dec 2017 08:28

Yes - I should maybe clarify that my client uses a form principally so that he doesn't forget to include any important information.

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By Duggimon
08th Dec 2017 08:57

Exactly as Lion says, print up your own receipts for the seller to sign, if buying from Gumtree you could also keep a screenshot of the ad for your own records to prove it existed. The other sites, as you say, keep a record of your transactions that can be referred back to.

In the face of reasonable evidence it occurred, HMRC would need some sort of evidence that it did not in order to contest it.

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By Manchester_man
08th Dec 2017 11:11

Also, as part of the records you keep, don't forget to record the address of the seller, if it is a Gumtree type transaction where you go to physically collect the goods.

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Replying to Manchester_man:
RLI
By lionofludesch
08th Dec 2017 11:39

Manchester_man wrote:

Also, as part of the records you keep, don't forget to record the address of the seller, if it is a Gumtree type transaction where you go to physically collect the goods.

Not sure that "Westbound car park at Birch" is going be helpful.

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Replying to lionofludesch:
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By legerman
10th Dec 2017 10:58

lionofludesch wrote:

Not sure that "Westbound car park at Birch" is going be helpful.

You beat me to it!

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Replying to legerman:
RLI
By lionofludesch
10th Dec 2017 11:03

Jeez - by two days ?

It wasn't much of a race.

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