You may be aware of a story circulating in the press last week about a comment from shadow chancellor, Ed Balls, who suggested people should get a written receipt for all transactions, even small gardening jobs.
Mr Balls went even further stating that he always asks for a written record of any purchase or payment made because “it was the right thing to do”.
Work and Pensions Secretary Iain Duncan Smith said this was “absurd” and showed Labour did not understand business, emphasising “Labour’s complete lack of understanding of how business works and how people get by”.
We would firstly like to remind everyone that paying a self-employed person in cash for doing a small job around your house or garden is completely legal, and furthermore, there is no legal obligation whatsoever for you as the customer, to keep a record of the payment.
As a matter of fact, all UK tax obligations lie with the self-employed person you are paying, and even then a tradesman has no obligation to even offer you a receipt. However if you are self-employed it is vital you keep proper records, so that you make sure you are paying the correct income tax and VAT, if applicable.
What makes this story even more satirical is following Mr Ball’s comments, a further article broke out about how he was one of twelve shadow cabinet members who had claimed expenses without providing receipts!
Mr Balls, in common with his 11 colleagues, did not submit a single receipt for the work done on his property and garden, despite his earlier insistence that he had obtained receipts for every single cash payment since he entered politics 21 years ago.
If you are self-employed it’s vital you keep hold of all receipts to back up your figures for the purpose of claims sent to HMRC. It is worth remembering that HMRC check can investigate how businesses keep their records and if they decide to look at your business records they will usually contact you by letter. You must keep business records to fill in your tax returns correctly, and pay the right amount of tax at the right time to avoid interest and penalties. You must normally keep records for at least 6 years from the end of the last company financial year they relate to.
If you would like to learn more about the importance of record keeping and what exactly you need to keep please email email@example.com or, alternatively give us a call on 01332 242257.
*Image sourced from Fabio Venni