For many of us, business record keeping involves a clever combination of accounting software, spreadsheets and a drawer full of receipts. This works fine until you can’t find the receipt you’re looking for, or you didn’t receive one. If this happens, you don’t need to panic. You may still be able to claim some expenses without receipts.
What is a business expense?
Whether you’re a sole trader or a limited company, it’s likely your business will have various running costs. From renting an office, to travel costs and employee salaries, there is a range of business expenses you can claim back against your tax at year end. This is a vital part of running a successful business, as claiming expenses will help to keep your taxable profits as low as possible.
To help you get your business expenses in order, we’ve broken down six types of business expenses you can claim without receipts or invoices.
1. You never received a receipt
There will be occasions when you buy something for your business and you don’t receive any formal documentation of the exchange.
For example, if you were to buy a second-hand computer screen via Facebook Marketplace or on Gumtree, it’s likely you’d pay for it in cash. Therefore you’d have no documentation of the purchase on your bank statement, and likely also wouldn’t receive a receipt from the seller.
To claim this purchase as a business expense, it’s important to keep a thorough record including information about the item, as well as who you bought it from, and how much it cost. Try to be as detailed as possible. Remember that to claim back the full amount the item must have been purchased solely for the purpose of your business.
Tip: If you haven’t kept a record (although always suggest you do), you can reasonably estimate costs, as long as you show your workings out and have physical proof of the item in question.
2. VAT claimed on items under £25
Businesses that are VAT-registered can claim back VAT on the majority of purchases, although there are some exceptions. So, when it comes to paying your VAT bill, you can deduct VAT already paid on purchases from the amount you owe.
In most cases, to deduct VAT you need a VAT-specific invoice or receipt, which you have to ask for in addition to the standard till receipt. However, for some items under £25, you can claim back VAT without any need for the paperwork. Examples include:
- Car parking, not including the use of an on-street meter parking, which is outside the scope of VAT.
- Phone calls from public or private telephones.
- Purchases from coin-operated machines, such as vending machines while you are on a business trip.
- Road tolls.
Tip: Keep a clear record of all instances where you need to claim VAT without a receipt. Always include what you purchased, as well as date, location and exact amount.
3. Bank statements instead of receipts
If you’re not claiming back VAT and you lose your receipt, you could still be able to claim. Your bank statement can serve as proof of purchase, as long as you paid using your business card.
This shouldn’t be something you rely on though. It’s always good practice to keep receipts, which you can reconcile against your bank statements. This will ensure you’re completely covered should HMRC ever choose to investigate your business.
Tip: You cannot use this method to claim back VAT. For purchases over £25, you must have a specific VAT receipt or invoice to claim.
4. Mileage based on the flat rate rather than actual costs
If you’re a sole trader or operating as a partnership, you don’t need to keep receipts for the cost of running your vehicle for business. Instead, you can calculate expenses using a flat rate for mileage. This may not be the most cost-effective method, though, so always do your research.
For cars and good vehicles, you’ll pay 45p per mile for the 10,000 miles and 25p per mile after that. Motorcyclists pay a flat rate of 24p per mile, regardless of distance.
So for example, you drive a motorcycle for work – perhaps you’re a self-employed courier – and you travel 19,000 miles over the year. You can work out your simplified expenses as follows:
19,000 miles x 24p per mile = £4,560
Total expenses = £4,560
If you drove a car for the same distance, the calculation would be:
10,000 miles x 45p per mile = £4,500
9,000 miles x 25p per mile = £2,250
Total expenses = £6,750
Tip: If you’re operating as a sole trader or partnership, use the government’s simplified expenses checker to compare what you can claim using simplified expenses against what you could claim if you worked out actual costs.
Check out our short guide on how to claim business travel costs.
5. Working from home business expenses
If you’re self-employed and work more than 25 hours from home, you can calculate a flat rate based on the hours you work. This means you don’t need to waste any time looking through your itemised bills to work out the percentage of business use.
If you work at home between 25 and 50 hours a month, you can claim a flat rate of £10 per month. Sole traders and partnerships who work at home between 51 and 100 hours per month can claim £18 a month and those who work over 100 hours can claim £26.
So, if you usually work from a co-working space but have a couple of months of working 100 hours a month from home, and three months where you work 30 hours from home, you can work out your simplified expenses as follows:
2 months x £26 = £52
3 months x £10 = £30
Total expenses = £82
Tip: The flat rate doesn’t include telephone or internet expenses. You can claim the business proportion of these bills by working out the actual costs.
6. Living at your business premises
Some small business premises double as the business owner’s home. Examples include home-based craft businesses, home-based childcare, bed and breakfast, small care homes, etc. If this is the case for you, simplified expenses can be used to work out a flat rate of costs associated with the number of people living on the premises.
In this instance, the flat rate is deducted from the amount you can claim in expenses. So, if it’s just you living at your business premises, you’ll need to deduct £350 per month from your allowable expenses. If there are two of you, the amount is £500 per month and for three or more, it’s £600. Once you work out the flat rates of costs associated with living on the premises (i.e. costs not relating to the business), you then subtract these from your total running costs.
For example, you run a guest house. You live there on your own for the first six months of the year, and your elderly mother joins you for the second half of the year. It costs £30,000 per year to run your business. You can work out the flat rate you need to deduct as follows:
£350 x 6 = £2,100
£500 x 6 = £3,000
Total amount to be deducted from expenses = £5,100
You can claim:
£30,000 – £5,100 = £24,900
Tip: If someone lives at your business premises for part of the year, you only need to deduct the relevant flat rate for the months they live there. The same applies if you only live there for part of the year.
Always keep a record of expenses when you can
Of course, these business expenses without receipts or invoices are just some examples. The rule of thumb is to make sure you collect and store tax records diligently. While we know things can happen sometimes and it’s not always possible to get a receipt, the ideal scenario is to have a record. It may happen that you have your records in place but lose them somehow. Bear in mind that there are regulations related to how to handle missing receipts and invoices.
Self-employed people must keep records of their receipts (either paper or digital) and other tax-related documents for 5 years after the 31 January submission deadline. For limited companies, that period is 6 years from the end of the company financial year. This is necessary in case of a tax compliance check conducted by the HMRC.