Advice for keeping on top of expenses

Wednesday, 14 November 2012 01:06

Staying on top of expenses is vital

Staying on top of expenses is vital

If you're a contractor, it's vital you manage your financial records closely and ensure your expenses are in order. While, admittedly, you might find you are unable to devote as much time to doing this as you would like, particularly when attempting to obtain contracts and working on existing projects, it is incredibly important that you pay close attention to this.

Failing to file all expenses which have been incurred wholly, necessarily and exclusively in the performance of your employment duties can in fact mean that you could miss out on extra income that could have been reimbursed to you as tax relief.

However, you can easily fall behind with doing this while you're juggling other business tasks, which is why many contractors decide to engage the services of an accountancy service provider to assist them with their payroll and accountancy matters.

Of course, doing this does not mean you do not have to put any effort on your part into keeping proper accounts of your expenses.

Even if it is for relatively small sums, you should make sure there are proper, legible records of all the expenses you have incurred wholly, necessarily and exclusively in the performance of your employment duties as a contractor. Remember that upon submitting your self assessment tax return to HM Revenue and Customs (HMRC) you may find that you are asked to provide evidence of the expenses that you claim to have incurred, so having records of all your costs to hand is vital. That way, you will be able to respond immediately to any request from HMRC and ensure your tax commitments are met.

This means that you should look to get receipts for all expenses that you incur, although if you're unsure what can be claimed you should ask an accountant or check with the HMRC for clarification. Even in cases where you don't normally tend to bother to obtain a receipt – for example, when buying petrol for your car or payment for a taxi journey – if it is for a genuine business expense, you should make the effort to do so.

If you have a lot of expenses to claim, you're likely to find you have accumulated dozens of receipts. They can be easily misplaced when the time comes to fill out your tax returns, so it is worth setting up a proper filing system where receipts and similar documents can be placed for safekeeping. This will help you to highlight exactly when and where you incurred expenses and how much was paid. Of course, you will also need to be disciplined enough to commit yourself to using this system throughout the entire financial year.

Having a paper filing system is certainly advisable, as this can help you to establish and modify records of your expenses. Doing so will certainly make it easier to calculate your costs, as using the traditional calculator can create scope for human errors to be made when establishing your expenditure and assessing where tax can be claimed back. This means you can share records of your expenses with the accountancy service provider that is providing you with assistance on tax and accountancy matters more effectively.

If you are using a reputable accountancy service provider they will have online portals and smartphone apps which have been designed to help contractors remain on top of expenses, something which may prove useful for those who spend significant periods of time away from their office.

With so many ways in which to manage contractor's costs, you really have no excuse not to keep a proper record of your expenses and meet your tax commitments promptly.



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