“Accountancy is the process of recording financial transactions pertaining to a business. The accounting process includes summarising, analysing, and reporting these transactions to oversight agencies, regulators, and tax collection entities.” That’s as good a definition as any. For our purposes though, accountancy is simply sensible financial record keeping.
It’s important to recognise the dramatic effect technological development has made in the field of recording income and expenditure for the small sole trader. In the past receipts (often grubby) were required to support basic items of expenditure where payments were made in cash. Today, with the ubiquitous use of contactless payments for either the smallest items makes it much easier for an accountant to work from the bank statements alone. That said, supporting receipts are always an advantage and for the larger purchases (computers etc) mostly necessary.
As discussed in the above sections, it is often necessary for the sole trader to apportion items of expenditure between business and personal use. Say, for example, a motor vehicle is used partly for self-employment business use and partly for family use, one needs to decide the appropriate factor to apply to the expenditure. This is a mixture of art and science and I am happy, in consultation with you, to determine the most beneficial (allowing for reasonableness) apportionment for tax refund purposes.
Sometimes, where expenses do not go through your bank account or credit card facility, estimates of relevant business expenditure may be made. HMRC may challenge such estimates, but in my experience so long as the item(s) is in line with industry averages any such queries are swiftly resolved.
I prepare your tax return based on — as far as the self-employed income and expenditure is concerned — the accounts I have prepared on your behalf. It is important therefore that they are accurate. It is my experience that taxpayers are more likely to understate their allowable expenditure than their gross income. It is for me crucial therefore to ensure that all expenditure wholly and exclusively incurred in the trade or profession are properly recorded, so that any tax repayment is maximised.