Self employed Builder

[Matthew O]

Morning all,

Typical English weather here in Essex this morning, raining and looks as though there could be more.

I am currently doimg my brother-in-laws tax return. The previous years return was done by a firm of his accountants. He woke up one day
and thought that he is paying too much so he decided to kick them into touch and pass it on to muggins here. My B-I-L is in the building trade.

I have noticed from the previous tax return that the accountant has put through some costs but there are no receipts. These costs are;

Protective Clothing 195.00
Cleaning and laundry 136.00
Use of home 104.00
Printing Postage and Stationary 39.00
Sundry expenses 195.00

My question is this; Although there are no receipts, would these type of costs be deemed to be acceptable by HMRC, given the type and nature of the work?

Regards

Matthew

[Budget83]

Well the home as office is ok you can claim £2 per week without any receipts

you can claim a laundry allowance in the same way, check the link below:

http://www.hmrc.gov.uk/manuals/eimanual/EIM32712.htm

.

The other expenses should have recipts to back up the claims but its possible the accountants use a set framework for constructing these accounts for small contractors.. A bit naughty but contractors are renown for not keeping any recipts so these things are normally estimated.

[Budget83]

Sorry to fully answer, yes they would be acceptable with receipts if HMRC investigated and you couldnt provide evidence of them well they might not look kindly on plucking numbers from thin air.

[Matthew O]

Many thanks for your reply.

If the tax man came across something he didn't like of this nature, presumably the risk to the tax payer is the amount deducted plus a bit of interest?
Or are there any significant fines?

Regards

Matthew

[Budget83]

I believe the worst they can fine you is 100% of the tax owed + interest.

In this case that wont be very much but I would cross my fingers that they have biggers fish to look at

[mullet]

Apart from use of home, the total is £565 - of which much or all could be allowable. No self respecting HMRC officer would get out of bed for the tax and NICs on £565 (about £160), let alone charge a penalty.

Don't worry too much, talk to your b-i-l and discuss each item to check whether he is incurring any expenditure at all on each and if so whether it is likely to have been around the amounts stated. If so, claim reasonable amounts as deductions.

Then educate b-i-l for the future to keep receipts.

Protective clothing and laundry could have been subject to a trade agreement, so it might be useful to check whether he is a member of any trade guild or association who might have negotiated national amounts with HMRC.