Can contractors claim expenses without receipts?
The short answer to one of the questions we contractor accountants are often asked – ‘Can contractors claim expenses without receipts?,’ is a reassuring ‘yes.’
So some expenses can indeed be placed through your limited company without a receipt, writes Christian Hickmott, CEO of Integro Accounting. However, there are several factors to consider, which we will breakdown for you, here, exclusively for ContractorUK.
What happens if I do not get a receipt for a business expense?
Firstly, let’s start by saying that any good accountant will tell you that it is good practice to not only keep a receipt for each company expense, but to log the receipt as soon as possible with as much detail as possible!
Yes, you can still try and claim some company expenses through the business without a receipt, and in some cases where you have paid with cash, for parking or road toll charges for example, you will not always be given the choice of a receipt. So, in this instance we would recommend the following:
- Provide a bank statement to show proof of purchase if paid by card or contactless.
- Picture evidence, for example in the instance of parking, to show time and date.
- Comprehensive detail on the claim in question including transaction date, location, purpose, total amount, VAT breakdown (if applicable) and reason for no receipt.
You need to make it clear that this expense was indeed for the sole purpose of running your business.
Challenges you face with no receipt
By not providing proof of receipt, you do leave yourself, and your company, exposed to several challenges:
- Evidence it was indeed a company expense and not a personal expense - simply showing a receipt for £500 at an electronics store does not prove that the spent-£500 was a computer peripheral your company laptop!
- Less clarity for company accounts - not only do receipts help in justifying your business claim to HMRC, but they also come in handy when going through your tax return with your accountant. Your accountant gets full clarity on the transaction and can issue the receipt to help reduce your incorporation tax, saving time and worry.
- Unable to claim VAT on company expenses - for those companies VAT registered, the simple fact is that, if you do not have a receipt or invoice showing the breakdown of VAT applied, you will not be able to claim this back, and no amount of detail provided can back up these claims. You will lose this opportunity.
- Risking exposure to HMRC - we would always advise our clients to get another copy of a receipt if lost or damaged. Without this proof, HMRC could challenge you as to why there was no supporting document and review other areas of the business, leaving yourself more vulnerable, even if the business is up to scratch.
How long do I need to keep my company’s receipts?
HMRC has become much more flexible over the years. They no longer require paper receipts (unless you wish to keep them!) but will now accept electronic copies, photos of receipts and digital transactions.
We recommend to all our clients that receipts are kept for five years as this is how far HMRC can legally go back if they decide to investigate your accounts.
Technology has evolved so much that logging receipts and information for your company expenses is so much more convenient. Indeed, most popular bookkeeping programmes will allow you to scan and store electronic copies.
Are there any expenses that do not require a receipt?
There are a few areas to be aware of that not do not require a receipt or are claimed against slightly differently to a standard claim. Some key examples are:
- UK Incidental overnight expenses – for each overnight stay, you can claim £5 without a receipt for employees claiming on incidentals such as newspapers, laundry charges and phone calls.
- Home allowance – when working from home you are entitled to a home expenses allowance. This is a claim you can make against the property rather than a specific bill/receipt. If working through a limited company, you will be able to claim a set allowance, whereas if you are a sole trader there is a sliding rule amount as follows:
- 25 – 50 hours per month = £10 per month
- 51 – 100 hours per month = £18 per month
- More than 101 hours per month = £26 per month
One final thing to note is that any invoices or receipts issued from a retailer will not provide a VAT breakdown, so remember contractors, such receipts must be asked for on request, unless you get an especially helpful cashier who saves you the trouble and asks if you’d like one!