Landlords Bamboozled By Business Expenses
A report says that dealing with business expenses is one of the biggest financial headaches for landlords.
Some landlords do not know the difference between a legitimate business expense and one that is not, claim 53% of accountants polled by online software firm FreeAgent.
The accountants explain that checking and putting correct business expense claims is the most common financial record-keeping mistake made by clients. Almost a third complained they had to review business accounts to strike out wrong claims, while a quarter spent time including expenses clients had missed.
Accountants identified the main problem for clients as failing to record expenses correctly in line with income and payment details on bank statements. FreeAgent CEO Ed Molyneux said:
“More than half of the accountants we surveyed said that expenses were the most common area for micro-business clients to make mistakes in their accounts, so it’s clear that this is a big issue. “Accountants regularly have to deal with the fall out of micro-businesses trying to claim back expenses - whether it’s trying to claim back expenses that they’re not allowed to, or failing to claim expenses that are actually permissible.”
HM Revenue & Customs (HMRC) can fine taxpayers for making careless or deliberate errors in their financial records.
Careless errors happen when a taxpayer fails to take prudent action as a reasonable person. HMRC gives several examples of careless behaviour in a manual for tax inspectors.
- A self-employed plumbed who keeps poor financial records. He cannot check if his figures are accurate and cannot confirm they are 100% correct.
HMRC claims his attitude shows a lack of reasonable care
- A taxpayer trades up a van for a new car he drives for business and private trips. Instead of splitting business and personal costs according to use, he claims them all as business costs without taking advice from an accountant or HMRC.
HMRC argues his lack of action to determine what they can claim shows a lack of reasonable care.
Fines for tax return errors can range from nothing for simply making a mistake up to 30% of the tax due for not taking enough care with financial records.
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