If your business deals with a lot of transactions, it can be easy to lose track of receipts or invoices. Whatever method you use to store your records, corrupt files, poor filing systems or forgotten bits of paper can all lead to missing business receipts or invoices. So when you’ve exhausted your search and still can’t find a missing document, what should you do?
Before you go pulling all your hair out or taking other drastic measures, take a deep breath and read our guide below.
The types of receipts and invoices that go missing
It’s worth noticing that it’s okay to keep tax records either on paper or in the digital form. However, bear in mind that none of these forms provides total protection against tax records being deleted or lost.
Lost business expense receipts: Losing a receipt for a business expense is likely to happen to most businesses at some point. If you are planning to claim business expenses relating to a missing receipt, it starts to become much more of a headache.
Lost copy of a client sales receipt: Receiving payment means that you need to issue a receipt for the customer. You might keep a copy of that receipt in the form of a stub book or till receipt. Losing your copy means losing evidence that the transaction happened.
Lost invoice sent to a client: There are several reasons why you may lose a copy of an invoice that you sent when billing the client. Perhaps the file got deleted or, you lost access to an email account where the invoices were kept. Whatever the reason, it isn’t a pleasant situation to find yourself in especially if the invoice was particularly large.
Missing receipts and invoices: Be prepared to provide evidence
HMRC demands that there should be sufficient evidence for all expenses and income stated on a tax return. But the term ‘sufficient’ evidence is unfortunately a bit vague. Realistically, what does this mean?
- Bank statements are sufficient evidence
For small expense items, such as a taxi fare and some other business travel costs, there shouldn’t be too much of a problem. If you’ve lost the original receipt from the taxi, then as long as you have some record of payment from say, a credit card, you should be OK. You can still claim these expenses on your tax return even though the receipt is missing. Even with a larger expense, like a computer purchase, if you can show a corresponding payment on a bank statement or credit card bill, you should be in the clear.
- Getting a tax investigation is possible
The problem starts to arise if you consistently start losing receipts, especially if you lose several high-value receipts. When this happens, HMRC may undertake an investigation into your finances and disallow some or all of these expenses. A one-off lost receipt with alternative supporting evidence is usually OK but several missing receipts are highly questionable.
- Some amounts can be estimated
If you’ve lost several small receipts of one type — petrol receipts for a business vehicle, for example — it can be enough to estimate the amount you’ve paid over the year and to claim expenses using this estimate. Note that you need to have other ways of proving this, like showing the mileage used on the vehicle. Also, if the amounts claimed vary drastically from filings from previous years, this may open the doors to an investigation.
- Watch out for VAT records
If your business is VAT-registered, all expenditure items should have the corresponding VAT receipt attached if you wish to reclaim the VAT. However, if you’ve lost a receipt to use for reclaiming VAT, you can still provide alternative methods of evidence. Note that this is at HMRC’s discretion and you will need to carefully outline the VAT split as part of the expense.
Dealing with lost invoices comes with the same advice. If you can show a corresponding payment on a bank statement for a one-off lost record, you shouldn’t have any problems. Just be careful if you lose several invoices or if your business is VAT registered. Be prepared to show other forms of evidence should HMRC start asking questions.
Avoiding future mistakes
Losing a business receipt is often not a big deal but it’s important that we all live and learn from our mistakes. To avoid repeating the same mistakes, make sure you have a robust, consistent record keeping system in place to keep track of expenses. Take a look at why you lost the receipt and how you can avoid doing it again. A disaster recovery plan for your accounts may come in handy.
To make things easier, cloud accounting software such as QuickBooks, Xero or FreeAgent have the capacity to take photocopies of receipts and invoices and to attach them to the relevant line item of expenditure. You may also use an invoice and receipt data entry apps, such as arbitrue, which works as handy storage for your documents.
A final word of warning
Once you’ve completed your tax returns and are ready to file, you’ll note that you have to agree and sign a statement of validity at the end. The statement says that you agree that you have completed the form accurately and to the best of your knowledge.
The message to take away is that you should be prepared to defend any of the information that you have included in your filing, and that you should have the necessary records as evidence to your claims. Otherwise, you may face tax penalty charges that may be related to missing business receipts or invoices or other issues with your tax records. If you’ve followed our advice above, you shouldn’t have too much to worry about!