I have long kept a paperless office. At one point it was the size of a desktop computer and the desk on which it sat. Then it was the size of a laptop. When I get my Nokia E90 at the end of this summer, my paperless office will be the size of a smartphone.
And it will fit in my pocket.
Now, I will continue to be registered in the UK for both income tax and VAT and I will continue to file my accounts online for the foreseeable future. But...
...if the taxman or the VATman sends me an email and says he would like to come and do an inspection, what's he going to do if I am in Dubrovnik or Dubai, Reykjavik or Rio?
Fly out and meet me?
good question, It's a good idea to plan for as I'm sure the "I'm not in the uk and dont' have an office you can inspect" would set some bells off for sure lol.
even better question is why still have a UK company when by the sounds of it you aren't in uk that much anyway, must be far better, more tax efficient company structures out there in different countries which you could incorporate in ?
Because muggins here is paying for the schools and hospitals, that's why.
But let's not get off topic... (...we can have that debate in Tax-free havens and Affiliate Marketing)
I would be interested to learn if there is anyone here who actually is is a similar position to the one that I described in the first post and, if so, how it works out in reality?
Are you a limited company? - my guess would be that if you are a limited company then they will want to meet you at your registered office failing being able to meet anywhere else.
Alternatively they would probably have no objection to you taking all of the documents to them - they are after all inspecting your documents, not your business premises - when I had a VAT inspection several years ago the inspector spent about five hours sitting happily at my kitchen table.
You mention that you keep a paperless office - all well and good but assuming you are then scanning any paper invoices, do check that whatever system you are using to store and retrieve the scanned images has been approved by HMRC - if it hasn't then they will ask to see the paper originals and saying "I've scanned them and destroyed them" will not go down well against your legal requirement to keep all documents relating to your business for at least 6 years.
No. A sole trader.Are you a limited company?
I am not scanning any paper invoices because I have none. CJ and Tradedoubler and ValueClick and Adsense and so on do not send me any paper invoices. If I need to do any self-billing, I type up a .doc file and save it to my hard drive. So, there are no paper originals.You mention that you keep a paperless office - all well and good but assuming you are then scanning any paper invoices
As for inland revenue documents, national insurance and so on - yes I have all of those filed. That's the only real paper in my otherwise paperless office.
I expected there to be quite few others here with an office-in-a-laptop setup. (Even if they're not globetrotting).
Aren't paperless offices normal, these days?
You should probably have an accountant really, which would solve this problem. Most inspections would normally take place at your accountants office rather than your own anyway (certainly in sole trader circumstances anyway).
A good accountant will always save you more than he will charge you, and it's one less thing to worry about.
Hi,Originally Posted by Iskander
Presumably this thread is a what-if?
A HMRC audit visit will be primarily to reconcile/agree your records to the accounts/VAT returns and test check the supporting documents and make sure you have accounted for VAT properly. A tax inspection will check a sample of your purchase invoices and expense claims (if applicable) to make sure you have not claimed non-tax deductible/personal expenditure against your accounts/tax return, check your bank statements and test whether you have included all income in your accounts. This is why I recommend a separate bank account for business use so that your personal and business affairs are kept separate. If there are missing invoices, then the inspector/auditor may assume that they have been "lost" on purpose and treat them as non-tax deductible.
A business is required to keep their accounting records for 6/7 years, so printing/scanning to pdf and archiving to cd/dvd each year would be a good idea and putting what paper invoices exist into storage, just in case.
Presumably you have pdf copies of sales invoices (ie CJ/TD etc) and have originals of purchase invoices, or can pdf/print online invoices for Adwords, broadband/domain names and bank statements etc?
The key issue in my experience is to make sure that you have supporting documents/accounting reports which agree to your accounts and tax returns. This is not always as straight forward as it seems where the accounting records are incomplete and the accountant preparing the year end accounts and returns do not supply their adjustments/reconciliations to their client.
If you use a computer accounting system always make sure that your accountant gives you the year end journals to enter into your accounting system so that your accounts agree with the issued/submitted accounts, otherwise you will be paying them each year to reconcile/agree your figures to theirs. This costs more and more each year as their staff change and are unfamiliar with your business and the adjustments become harder to identify. Also ask them for copies of the reconciliations they have prepared for your records so that you have a picture of the quality of your records and can provide to HMRC if requested.
The more complete your records ... the less time the visit will take. Also, the more complete and accurate your records, the more control you have over your business, and the lower your accounting fees.
Regards
Keith
High Royd Business Services Limited
Small business and affiliate marketing specialists
Specialist affiliate marketing accounts/tax services - fixed fees - Clearbooks online accounts software
** Free tax saving guides at tips.hrbs.biz **
Yes.Presumably this thread is a what-if?
What if I am in Buenos Aires or Bali?The more complete your records ... the less time the visit will take.
HMRC are usually quite flexible with holidays and will probably arrange the visit for when you are next in the country. They may request that you arrange to make the records available for them to review in the UK, or email/send cd/dvd containing your records to them or your accountant/UK representative.
The key thing if you are travelling, is to store your accounting records in a format that can be accessed remotely and/or archived so you do not need to take them with you. An online accounting system will also mean that you can keep your books wherever you are and keep track of how your business is performing (a free trial is available at HRBSonline if it is of interest). If you are VAT registered you can prepare and submit your VAT return online.
Regards
Keith
High Royd Business Services Limited
Small business and affiliate marketing specialists
Specialist affiliate marketing accounts/tax services - fixed fees - Clearbooks online accounts software
** Free tax saving guides at tips.hrbs.biz **
I would like to add another 'what if' which happened to me.
The company I was an affiliate of gave us a month's notice that they were not going to have affiliates any more. I was away on holiday during that one month notice period. When I came back, I thought I had better download the last 6 years worth of affiliate payment records, even if nothing else. Guess what - they had taken the website offline and fired all the staff that used to work with the affiliates, and moved to a new registered address - the company now had a new holding company and was ceasing to trade as a separate entity.
The only record I was left with was the credit to my bank statement.
Since then, I have kept my own records and not relied on the merchant's online records.
Another 'what if'
Ever had your mobile get wet and stop working? Or had a hard disk crash?
A last thought. At the least, you must have an address which is used for National Insurance statements, bank statements and tax returns - I think they may expect to be able to meet with you there or to bring all your records to a tax office convenient to you.
The nice thing about this argument is that complying with tax requirements is not meant to cost you any additional expense.
Thanks moredial for raising these valid points.
Yes, I started doing the same almost from the point when I started my business.Since then, I have kept my own records and not relied on the merchant's online records.
Yes, I thought about this. Disaster-proof backup is key to this kind of set up. I intend to have a live copy of my site on the server, a backup copy on my phone (or on a memory card which interfaces with the phone), a backup copy on my connected laptop in the UK and a backup copy filed in a Yahoo! mail account or a gmail account. The backup copies on my connected laptop in the UK and on my phone will be synched backwards and forwards using Orb - and the webmail-based storage system is for emergencies in case the files on my laptop and phone are both lost and the server crashes.Another 'what if'
Ever had your mobile get wet and stop working? Or had a hard disk crash?
Yes and this point really gets to the heart of what I was trying to ask in the initial post. They may well expect to meet me there. But I may not be there. And I may not have any intention to return for a long time.At the least, you must have an address which is used for National Insurance statements, bank statements and tax returns - I think they may expect to be able to meet with you there or to bring all your records to a tax office convenient to you.
What I am awkwardly trying to articulate is not that I have a problem, but that the tax office has a problem. How well are they adapting to 21st century work setups? (Agreed, giving up a fixed address to become a cyber-bum is probably fairly unusual, but I can't be the only one who is considering it... and indeed there are some people already doing it).
If they really want to see you then I suspect that "you have no intention to return for a long time" would not be of much interest to them, they would simply expect you to return within a reasonable timescale (say 3 months).
Bear in mind that if you don't comply with a tax inspection they will simply issue an estimate of what you owe (which will normally be outrageously high), and then leave it to you to prove that you don't owe that amount. The problem once you reach this stage is that a) the onus of proof moves to you and b) these disputes, can and do, last for years, often at a cost to you of thousands if not tens of thousands of pounds in accountants and legal fees.
I would advise anyone who receives a tax estimate to get professional advice - I had an estimate for > £3K for tax from a business I was previously involved in and my solicitor and accountant managed to turn it into a net repayment of almost £1K to me even after their fees had been paid - but it took almost 4 years to bring this to a conclusion.
I've been moving towards an office in a laptop for several years and I'm getting closer every holiday - when I find out in the field if it works.
I'm actually working at removing the laptop so I can have my office on a USB drive (just got a 16Gb one) but that's still pushing it ATM.
Sadly I've found quite a few of my customers still can't cope with PDF invoices or sometimes even BACs payments and I do have paper records going back 6/7 years as required.
Interesting thread all round.
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