To help your sole trader clients cope with year end, it often pays to send out a checklist of what you would like to receive from them and why. This not only communicates what a caring accountant you are, looking for all possible ways of saving them tax, but also makes your life easier by spelling out just what it is you expect to receive from them.
The obvious one: Ask for a detailed list of all income and outgoings categorised into type (provide them with the standard headings from the tax return, if not your own template). Make sure they know to include expenses (and income) that relates to pre year end that hasn't been paid for yet. Many of my sole trader clients didn't realise they could include their rent, for example, for March because they had not paid for it before year end. By pointing this out to your clients, you are showing your committment to reducing their tax bill legitimately.
Mileage: Ask your clients to keep a simple mileage log showing destinations, dates, and total miles in order to claim the 40p per mile allowable by HMRC (up to 10,000 miles). Discuss with your client whether they should also retain car expense receipts in case the capital allowances and business proportions of costs would be more beneficial to them. In this case, they would also need to keep a record of personal miles.
Costs of working from home: Ask your clients to let you know the number of weeks they worked from home (or used part of their home for business). Point out that this enables you to claim £3 a week from HMRC, bringing their tax bill down legitimately again. Discuss with your client whether it's worth working out the alternative cost of working from home based on proportion of the house used for business and the proportion of hours used (as compared to the rest of the family). After the cold winter we've had, utility bills have rocketed and it could really add value by suggesting performing this easy calculation for them to check if their tax liability could be reduced (but make sure you consider any capital gains impacts first).
Phone/broadband/mobile: If your client works from home, they could be using their phone line and broadband for business use. If they don't already, ask them to keep a log of all business and personal calls, and the proportion of the day they use the broadband as opposed to the rest of the family. Similiarly with mobile phone calls, a simple log of calls popped into a busines diary, can help justify the proportion of these bills that you can set against your sole trader clients income.
Capital items: Make sure you ask your client to identify capital items on any cost listing they provide you with. In these profit challenged times it can be worth not claiming any annual investment allowance or capital allowances, and carrying forward the full value of any assets purchased to set against future profits, rather than waste them in a year where the personal allowance exceeds any profits made.
How do you help your clients get ready for year end, and make your life easier in the process? Please add comments as to where you think we could improve our customer service and save our clients tax, as well as helping ourselves through obtaining good records from our clients.
Amy Taylor BSc (Hons), ACA, is a chartered accountant who qualified with first time exam passes in 1998. She set up her own practice in 2008 and provides dedicated tax planning and accounting advice to Mums in Business across the UK. She offers book-keeping, accounts, tax, self-assessment, payroll and VAT services, as well as specific tax...