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• # 122443
• Wed 03 May 2023 03:03 PM

Hi all,

I am wondering what to do about expenditure when my client is unable to provide a receipt or invoice for the purchase (s).  I have usually allowed a few small costs to go through the books without receipt or invoice as I am aware that a small percentage of missing invoices is unlikely to be considered material by HMRC - I never claim VAT without a VAT invoice - so entry goes in with no VAT.  

One of my clients has now made payments to several overseas suppliers via aliexpress (an online marketplace) and I have asked for the invoices/receipts - indicating that HMRC will require him to maintain documentation for proof of purchase.

The response I get from my client (a very small VAT registered ltd company) is this:

"We keep going over the same thing on this - There is no law saying someone has to give someone else an invoice, even if there was such a law it, could not be imposed on another country - A Paypal or ebay from me is all you need"

So my question is:

Is there any legal requirement to have documentary evidence of purchases made to allow those expenses to be recorded in the accounts of the company. 

Or is it just that the company just has to have some means of convincing HMRC that the purchase was a valid business cost and by not having invoices/receipts you leave yourself at risk to HMRC questioning those costs in the event of an enquiry from them?

My understanding is that if you don't have an invoice or receipt it is impossible to see what was actually purchased.  My client does keep documentation of delivery of items but these are not consistently kept and are not always easy to connect to a payment.  

I do not believe my client is trying to put costs through the books that are not legitimate expense but I am concerned he might be deemed non compliant if he were investigated.

As his bookkeeper is it my duty to ensure he is keeping adequate documentation or is it my duty to simply ensure that he is aware of the risk of appearing non compliant?

Thanks for your thoughts

Obviously I am not happy with the tone of his message and I am considering dropping him but wanted some input from the forum on this first

• Nell

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• # 122446
• Tue 09 May 2023 08:45 AM

Hi Neil

I find it impossible to get every single expense invoice/receipt from my clients.  The way I approach it is that first to make sure the clients know it is their responsibility to maintain goods records and the onus is on them to produce them on request should HMRC come knocking.  This is done when I engage them and it is stated in my Letter of Engagement.  As for legal, my understanding is that for ANYTHING going through company accounts a formal record must be kept and produced on request to the HMRC. The responsibility for this lies with the company owners/Directors. 

When doing the bookkeeping I manage it as follows: 

For regular DD's and standing order payments, as long as I have seen one invoice and can ascertain what it is for and if there is VAT, I don't ask for them every month, unless the amounts change significantly.   

For larger one-off payments that I can't identify, I send an email asking for clarification and a copy of the invoice, explaining that the VAT can't be claimed without one.  If it is for a large amount and there is VAT they usually manage to come up with one.  

When there are lots of smaller unidentified expenses, such as Ebay, Amazon, high street names etc,  I list them in a spreadsheet and send them via email asking for clarification on what they are for and for copy invoices.  If I don't get a reply to this before the VAT is due I chase it up.  If there is still no response I will make a judgment based on my knowledge of the client.  So either leave the transaction unreconciled until I get an answer, reconcile it based on previous transactions but leave it as Zero/Exepmt VAT, or I will allocate it to the DLA or Suspense.  

As long as you are not claiming VAT or allowing large amounts of unidentified sales/expenses through the company accounts.  If you made every effort in trying to get the information out of the client and have an audit trail of trying to do so, you should be fine.  

Any query still not resolved will usually get sorted at year-end.  If there is something you are really not happy about and it doesn't seem in line with regular day-to-day business dealings and you are not getting the right answer from the clients, then you have to protect yourself by giving them notice, and if necessary report them through MLR regs.     

Hope this helps. 

 Mary

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• # 122448
• Wed 10 May 2023 12:05 PM

Hi Mary,

Thanks so much for your reply in length and detail - it is very very much appreciated and yes is certainly helpful.

The process you describe is very clearly described and pretty much what I practice myself.  

I was looking for some verification of the process as my client appears to get fed up with being asked for copies of invoices.  So thanks for confirming my understanding of our responsibilities.  

In this instance he has also started using Aliexpress and is of the opinion that because HMRC have a new agreement with online marketplaces, whereby they are able to obtain sales records of all sellers from the online marketplace directly, that this, in some way, means he is no longer required to obtain/keep those invoices.  So I have posted these costs based on the ORDER details and the amounts actually paid (there is no VAT) but I have told him him that my understanding is that if HMRC were to check his accounts they would likely require copies of invoices for these purchases.  

If anyone has any more comment/information on requirements for invoices (as opposed to orders) for online market place purchases then I'd be interested to hear them.

BTW its NELL not NEIL - I often get that misreading of my name.

Nell

• Nell

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