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Tax myths #1 – telling HMRC about your expenses

Today we’re starting a new series of articles debunking some of the myths and misconceptions about tax that I’ve come across while lurking on message boards, talking to escorts or simply eavesdropping on drunken conversations in pubs.

This first myth concerns how much detail you have to give HMRC each year about your expenses, and whether you have to give them a complete list of all the expenditure you want to claim for, or even worse send them all your receipts to justify everything you claim for.

If you’re worried about having to tell the taxman about every condom, taxi fare and hotel room, there’s slightly bad news and very good news.

The bad news is that, yes, you do have to keep records of all your business income and expenses. If HMRC have any questions about your tax return, or if they decide to launch an in-depth investigation into your tax affairs, they can ask you to produce your accounting records including the receipts that support the expenses you have claimed. But you don’t have to produce them as a matter of course. And HMRC do not have the resources to investigate vast numbers of people: they concentrate on cases which look suspicious or are likely to lead them to uncovering large scale tax under-payments.

So, what do you have to send in to them every year?

All you have to do is submit a completed Tax Return, and here’s a picture of the first page of the self-employment section of the Tax Return form.

Self-employment page
Self-employment page

The business expenses you are claiming go into boxes 10 to 18 in the area at the bottom of the page, and then you add them up and put the total into box 19. You will see there are special boxes for some of your expenses, such as travel and also phone costs, and there’s also a catch-all box called ‘other allowable business expenses’. So it’s simply a matter of deciding which of your expenses go in which box, and then writing in the total amounts you’ve spent under each heading . You don’t have to give any detail, and you certainly don’t have to specify how much you spent on condoms – they would form part of your box 18 figure of other allowable business expenses.

In fact you may not even need to split all your expenses into the individual boxes. If your turnover (your total business income from clients) was less then £77,000 (which was the VAT registration threshold last year) you can ignore boxes 10 to 18 and simply put your total business expenses as a single figure in box 19. Job done.

So if you’re worried about how much detail you have to give to them taxman each year, you don’t need to be.




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