Do You Need to Keep Receipts for Tax Purposes?

Tax receipts on a table
Tax-records

Maintaining small records often seems to be a hassle for many business owners. Businesses in the UK are no different as they struggle to manage their record-keeping and often end up discarding important receipts.

While we understand it’s not very appealing to keep piles of receipts and invoices, doing so is crucial for many reasons. The UK government collected £716 billion in corporation tax in 2021/22, and many businesses that enjoyed tax benefits did so while maintaining their financial record.

Want to learn more about it? Continue to read below.

Importance of Keeping Receipts

Reading these benefits below will change your mind if you don’t want to hold onto your receipts.

Have a More Streamlined Record

Businesses across the world are required to have a well-organized and streamlined record for tax purposes. Keeping a record of all your business purchases on software or application can help you with that. Receipts come in handy to explain your spending and incoming trajectories.

Enjoy Tax Benefits to the Fullest

Your tax advisor will help you identify deductibles during tax season to help you save money in taxes. Keeping receipts of your business expenses is a great way to do that and get tax deductions from the government legally.

Be Transparent and Accurate

From tax audits to filing, keeping receipts will help you accurately track your business expenses and ensure transparency. Businesses that fail to produce receipts often get unwanted scrutiny from tax auditors and government authorities.

Person doing taxes
Tax-planning

Avoid Legal Troubles and Penalties

HMRC can fine businesses up to £3,000 if they fail to produce adequate records. Moreover, failing to keep expense and income receipts can be considered an understatement of profits. This has further repercussions that your business surely wants to avoid.

What Kind of Receipts to Keep?

Your tax accountant will comprehensively explain to you the receipts you must keep. But in most cases, business purchases, business improvement expenses, and deductibles such as travel, professional fee, and rent can be shown via invoices and receipts.

Do I Keep Every Receipt?

The UK government does not require businesses to keep receipts of very small expenses. However, if you can claim a deduction on an expense, it’s worth keeping a record of.

How Long to Keep Receipts?

HMRC has published a comprehensive guide on keeping receipts for tax purposes. In this guide, it’s noted that a business must keep the receipts for five years from the date of tax filing. For example, if your tax is for January 2022/23, you must keep receipts until January 31, 2028.

Make Your Tax Efficient in the UK

If you’re looking for tax advice, tax planning, and help with maintaining records, get in touch with IBISS & CO. The tax specialist firm is based in London and Walsall and offers tax advice to businesses across a variety of sectors. Chartered tax advisors and accountants at IBISS & CO. also offer inheritance tax planning, VAT services, and payroll services.

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