opening/closing stock records

[slick132]

Hi Josh,

 

1. What tax year is HMRC asking Q's about ?

 

2. Approx when did you start this business ?

 

3. Up to what date do you make your business accounts each year ?

 

4. Did you file your return to HMRC online or by paper return and did you meet the necessary deadline for filing ?

 

5. Did you file your own tax return or was this done by your accountant ?

 

When they refer to income tax computation, this would normally be your profit per your business accounts (income less expenses) less any Capital Allowances. I need to have your answer to Q5 before commenting on this further.

 

[josh587]

1 - 2015-16

 

2 - 4 years ago.

3 - i use paypal records 01 april to next 1st april every tax year.

4 - i filed online.

5 - i do my tax returns myself.

 

what they mean is they want my profits (after expenses) for that given year 2015/16? if yes, my profit & loss summarry is good to go.

 

it contains all the sales revenue i took in, & expenses therefore a net profit figure.

[slick132]

Hi Josh,

 

I forgot to mention above, you can also claim travel expenses incurred in the course of your business, whether by your own car or by public transport.

 

1. Am I right to assume you have NOT claimed any Capital Allowances ?

 

2. When you filed online, did you do so by or before 30/1/17 ?

 

It may be that HMRC used a template letter when they raised their Q's - perhaps one they normally send to an accountant. They may already have the info they've asked for when you filed your tax return. Did you give figures for income and for expenses ?

 

Could you post up a PDF copy of the HMRC letter after hiding all identifiers, ref no's, address, etc. This will help us help you

 

[josh587]

Hi

No i dont claim any capital allowances or anything like that just the expenses that i see as expenses related to my business.

 

yes it does look like a template letter. They want to see if my income is declared right hence this check. Im adamant it has been.

 

I have contacted the officer waiting for a reply regarding opening/closing stock records.

 

yes gave them expnses and income figures on tax return.

I have all the documents they want to see on the way to me minus the opening/closing stock records.

 

Im going to send this to them by end of this week hopefully, and wait for them to get back to me. I will update this thread.

Ok i will try if i can.

 

Thanks for the support.

 

2 - when i filed online, yes i did but about 2 days before the deadline. (ive done this the last two years, filling near deadline) they probably think ive made a mess of it.

[slick132]

Hi Josh

 

Can you please explain further what you mean in each of your 2 sentences below.

 

They want to see if my income is declared right hence this check. Im adamant it has been.

 

I have all the documents they want to see on the way to me minus the opening/closing stock records.

 

Also, you say you contacted the officer about the stock records and you're waiting for a reply. How did you contact the officer please.

 

Finally, I suggest you send nothing more until we see what HMRC have said in their letter and you answer my Q's in this post.

 

[josh587]

hi well the letter states if theres any tax to be paid or any tax due back to me they will tell me.

 

the documents they want to see bank staments, profit loss summaries, itemised expenses claimed etc are on the way i have them i can send them as soon as other documents im waiting for arrive.

 

via email, i said i couldnt supply stock opening/closing records as im on the cash basis form of accounting and these are something i didnt keep, waiting for a reply.

 

the letter says,

"every year they check a number of return sto make sure that there customers are paying the right amount of tax" and they are checking mine." and they will be checking the "whole of the return."

To help them with there "check send them the documents they requested."

[slick132]

Hi Josh,

 

When you replied to HMRC, did you use the suggestion in post #26 ?

 

You say -

the documents they want to see bank statements, profit loss summaries, itemised expenses claimed etc are on the way i have them i can send them as soon as other documents im waiting for arrive.

 

They're "on the way" from who ?

 

I suggest you don't send letters and doc'ts to HMRC bit by bit. Better that we consider the bigger picture so you can reply in the best way possible.

 

It would be better if you posted up a copy of the letter but, from what you say, it's an HMRC template that they've failed to adapt to your personal circumstances.

 

[TaxHero]

HMRC would expect you to keep business records for 7 years.

 

Therefore the stock positions could be ascertained at any time if you have the correct records.

 

Draw up a spreadsheet with this information.

 

Only send what they ask for, no more and no less.

 

Send it all in one go as advised.

[josh587]

Hi Josh,

 

When you replied to HMRC, did you use the suggestion in post #26 ?

 

You say -

 

They're "on the way" from who ?

 

I suggest you don't send letters and doc'ts to HMRC bit by bit. Better that we consider the bigger picture so you can reply in the best way possible.

 

It would be better if you posted up a copy of the letter but, from what you say, it's an HMRC template that they've failed to adapt to your personal circumstances.

 

 

Hi no it was just an email i sent the officer stating certain points dont apply to me, they asked if i used any estimated figures in my calulations -i have not.

they asked if i had any non trading income - i dont.

 

i also stated i dont have opening and closing stock records as as sole trader i dont have to have this as im on the cash basis accounting. This is what what ive been advised by an accountant, I will see what the officer says.

 

hence i needed clarification on those points.

 

I havent sent anything off yet, i am still waiting for copies of my bank statements to arrive.

 

Publishing a letter on a public forum is a bit to public, if you want to see the letter i can show you via pm?

[josh587]

Hi Josh,

 

When you replied to HMRC, did you use the suggestion in post #26 ?

 

You say -

 

They're "on the way" from who ?

 

I suggest you don't send letters and doc'ts to HMRC bit by bit. Better that we consider the bigger picture so you can reply in the best way possible.

 

It would be better if you posted up a copy of the letter but, from what you say, it's an HMRC template that they've failed to adapt to your personal circumstances.

 

 

unfortunatley i did not mention post 26

can you point me to the post again (post 26 is you asking me a couple of questions.)

 

 

My statements have been ordered from the banks.

I already have my profit loss summary which i used for 15-16.

I have drawn up an itemesed list of expenses claimed in excel for 15-16

 

The only thing im missing is opening & closing stock records. This is whats worrying me.

[josh587]

also i have NOT sent anything off to them yet. im waiting on a few douments to arrive in which case i will send them everything together.

Closing opening stock records is worrying me though as i havent kept this. I have asked the officer waiting for a reply.

 

again i have seen this, which seems to back me up on cash basis sole traders not being requireing to keep records of opening and closing stock.

 

https://accountants-community.intuit.com/questions/297677-why-are-cogs-the-same-on-an-accrual-basis-as-they-are-on-a-cash-basis

 

I do keep records of how much and what i buy and how much it costs me to buy, BUT not records of how much of it is left over at the end of the year and gets transfered over to next tax year,.

[slick132]

Sorry Josh,

 

I should have said "did you use my suggestion in post #20".

 

I see no reason for you to spend time working out stock figures when you don't need to submit them. Forget that for now is my suggestion and stop fretting about it.

 

The letter would have been fine to post with personal info and ref no's hidden. But we've already established HMRC used a template without adapting it properly. If I want sight of it, I'll let you know.

 

Keep us posted.

 

[josh587]

Sorry Josh,

 

I should have said "did you use my suggestion in post #20".

 

I see no reason for you to spend time working out stock figures when you don't need to submit them. Forget that for now is my suggestion and stop fretting about it.

 

The letter would have been fine to post with personal info and ref no's hidden. But we've already established HMRC used a template without adapting it properly. If I want sight of it, I'll let you know.

 

Keep us posted.

 

 

Hi thanks slick.

 

I will do.

 

Just waiting to here back from them re my questions.

 

Thanks.

[josh587]

one other question, i used my current perosnal account to pay suppliers rather than my busniess account, is this a problem? i did this as my business account is kind of poor they dont allow transfers internationally.

[slick132]

Hi Josh,

 

It is probably better if you have and use a dedicated business a/c.

 

However, there will be many folk who use a personal a/c because it's cheaper or has facilities that you need, like you say, international transfers.

 

HMRC will be looking for transactions that don't go through ANY bank a/c, ie cash receipts. Sounds like this isn't something your business involves maybe.

 

Before you forward the bank statements to HMRC, let us know if they've responded to what you've sent them so far.

 

[josh587]

Hi Josh,

 

It is probably better if you have and use a dedicated business a/c.

 

However, there will be many folk who use a personal a/c because it's cheaper or has facilities that you need, like you say, international transfers.

 

HMRC will be looking for transactions that don't go through ANY bank a/c, ie cash receipts. Sounds like this isn't something your business involves maybe.

 

Before you forward the bank statements to HMRC, let us know if they've responded to what you've sent them so far.

 

 

Hi ok. yes this was the case with me hence had to use my personal account.

hopefully tomorrow i will get a response.

im not susre whether i should just print the profit & loss summary off and send it in paper form or put it on dvd? sames goes for the itemised expenses i claimed for that year. its the same thing really whethere its printed or on dvd.

[slick132]

Hi Josh,

 

Prob best to calm down a bit and take your time.

 

Let HMRC respond when they're ready, and you must do the same. Don't be in a panic to reply to HMRC or supply data they want.

 

Please take your time and think things through before sending anything further to HMRC.

 

I would print off the doc'ts to send, then you have copies of the letter and accompanying enclosures.

 

[josh587]

Hi Josh,

 

Prob best to calm down a bit and take your time.

 

Let HMRC respond when they're ready, and you must do the same. Don't be in a panic to reply to HMRC or supply data they want.

 

Please take your time and think things through before sending anything further to HMRC.

 

I would print off the doc'ts to send, then you have copies of the letter and accompanying enclosures.

 

 

i suppose your right, ive never had to deal with anything like this before and to be honest im totally new to it so dont know what my rights are.

 

But this has got me worried though, im not sure why im being targeted for this.

 

Well i cant not say to them i cant send the documents they request? am i within my right to do so?

 

if i send them the documents and they confirm i have delcared my income right then this problem goes away.

[josh587]

the letter states the check is being made under section 9a of the taxes management act 1970, if this helps you understand any further on the type of letter it is. it does look like a template with other informational leaflet titled (general information about a compliance check) with the letter.

[slick132]

In the last para of your post #32, it says exactly why they're asking detailed Q's about your tax return. You've been randomly selected.

 

I'm NOT saying you should withhold any documents, or that you have the right to do so.

 

I'm simply saying, take your time to consider what you send, and when.

 

When you have your bank statements, go through them carefully to make sure there's nothing unexpected in them that HMRC could use against you.

 

[Queens_king]

I am a qualified AAT and If I had been home I would have offered to reconcile your accounts free from charge but unfortunately I am now an ex pat. See of you can find a good bookkeeper to help you out

[josh587]

In the last para of your post #32, it says exactly why they're asking detailed Q's about your tax return. You've been randomly selected.

 

I'm NOT saying you should withhold any documents, or that you have the right to do so.

 

I'm simply saying, take your time to consider what you send, and when.

 

When you have your bank statements, go through them carefully to make sure there's nothing unexpected in them that HMRC could use against you.

 

 

 

Thanks, i knew it was, ive been trading less and profits have been lower year after year that added with filling consistently late the two years probably flagged me. profits were 50% of what it was the year before.

 

Can you eleborate further on what you mean by unexpected? do you mean like any benefits ive recieved or other income which i havent decalred, if so, this doesnt apply to me as i dont claim any benefits (i MAY be entitled to them as my income is low in the 15-16 tax year but i dont claim any of them), neither do i have any other income which i havent declared to hmrc.

 

In that year i MAY have recieved some money from my father to buy some stock (which i have since payed back)....so this wouldnt count as income....also i had a payout from my car insurance as it was involved in a car accident, again, something that shouldnt be looked at as income.

 

if i am dead set sure that there is nothing to find in my statements, do you suggest i send them off to them?

 

The way they wrote they want stock records is like this -> they want "stock records (including opening and closing stock records)

 

Im assuming its not only opening and closing stock records they want....they want stock records too? i dont know what i can send for this? any suggestions.

[slick132]

Hi Josh,

 

When I said UNEXPECTED - I meant anything that would possibly cause you problems like :-

 

Undeclared income from your business or any other source.

 

Transfers to or from other accounts that would suggest undeclared savings or investments.

 

Income or payments for property you own and/or let.

 

Basically, anything that would show HMRC that you've been up to anything you've failed to declare.

 

Money from car insurance payout or from your father will not cause any probs.

 

Please FORGET the stock figures issue for now - HMRC used a template letter that's probably inappropriate so ignore it.

 

When you get the bank statements, go through carefully and let us know if they all look ok, or not.

 

[josh587]

Hi Josh,

 

When I said UNEXPECTED - I meant anything that would possibly cause you problems like :-

 

Undeclared income from your business or any other source.

 

Transfers to or from other accounts that would suggest undeclared savings or investments.

 

Income or payments for property you own and/or let.

 

Basically, anything that would show HMRC that you've been up to anything you've failed to declare.

 

Money from car insurance payout or from your father will not cause any probs.

 

Please FORGET the stock figures issue for now - HMRC used a template letter that's probably inappropriate so ignore it.

 

When you get the bank statements, go through carefully and let us know if they all look ok, or not.

 

 

 

Hi ive recieved the statements today, and have gone through them page by page, everything looks ok to me. (i would know) I only have one source of income, nothing else, i dont own/rent property or have any undeclared savings other than what is in my current account.

 

Please advice.

[slick132]

Hi Josh,

 

In that case, I see no prob in sending the bank statements off to HMRC.

 

All you need say is, "I enclose the bank statements you asked for."

 

Don't go into any other detail at all.