HMRC (HM Revenue & Customs) has a number of restrictions about what you can claim as a sole trader or limited company business expense, how to claim it, and how to keep track of your records once you've claimed.
Before we discuss the complexities of managing various business receipts, it's important to understand how business expenses affect cash flow, how to pay the correct amount of tax, and which expenses you can claim and how to claim them. You can get further information from a Persona Finance accountant now by visiting us at personafinance.co.uk.
Why you should manage your business expenses:
Managing business receipts successfully allows you to keep track of your cash flow and organise your records more efficiently. It also aids in proving that the payments you claim to have paid when filing your tax returns were made.
Here are some of the ways that effectively controlling your business expenses can benefit you:
- Prepared for tax audits
- Monitor employee expenses
- Better budget planning
What are the most effective methods of storing business receipts?
As your company grows, so will the quantity of expenses you and your staff incur on a regular basis. Digitally documenting all of your business receipts is a realistic alternative to paper (not to mention more ecologically friendly) because 5 years or more of business receipt records is a significant quantity of material to preserve.
HMRC has also reiterated this point,
“HMRC recommend you keep all the original documents you receive. This does not mean you need to keep them on paper. Most records can be scanned and kept electronically on a computer or a storage device such as a CD or memory stick.
We'll continue to highlight the most efficient methods of documenting and preserving your business receipts in the following list:
- Google Drive
Dext extracts the relevant data from your papers and returns it to you in a readable format or feeds it directly into your accounting software using clever technology. Keep in mind that their services come at a price.
How long should I keep these records of business expenses?
Keep in mind that various rules apply to different types of businesses. You must keep your business receipts for 6 years if you operate a Limited Company. Business receipts must be preserved for at least 5 years following the 31st of January submission date for the relevant tax year if you are a Sole Trader.
While HMRC has established this guidance, they do have the authority to scrutinise any company's finances for up to two decades if they suspect tax evasion. As a result, many businesses store their records for longer than the allowed periods of time.
For many businesses, managing business spending is a challenging and time-consuming task. As a result, you may feel a little overwhelmed by the task's process and no longer be able to manage your organisation successfully. With this in mind, we at Persona Finance are committed to providing even more value to all of our current and new clients. We provide a range of key accounting services remotely, from bookkeeping to verifying your annual accounts.
Please contact Persona Finance at [firstname.lastname@example.org] for more information on how we may assist you in achieving your business objectives.