{"id":9210,"date":"2023-10-31T17:38:08","date_gmt":"2023-10-31T17:38:08","guid":{"rendered":"https:\/\/www.oneaccounting.co.uk\/?p=9210"},"modified":"2023-12-07T11:36:42","modified_gmt":"2023-12-07T11:36:42","slug":"dont-take-accounting-advice-from-your-mate-down-the-pub","status":"publish","type":"post","link":"https:\/\/www.oneaccounting.co.uk\/dont-take-accounting-advice-from-your-mate-down-the-pub\/","title":{"rendered":"Don\u2019t take accounting advice from your mate down the pub"},"content":{"rendered":"\n

It\u2019s Friday night down the pub and you\u2019re on your second pint of Tennent\u2019s. You\u2019re busy chatting about the work week and your pal pipes up with some advice on expenses.<\/p>\n\n\n\n

\u201cMy accountant says it\u2019s fine to put your summer holiday down as a business expense<\/em>.\u201d<\/p>\n\n\n\n

The thing is, it\u2019s absolutely not fine in the eyes of HMRC. We\u2019ve heard of clients being told it\u2019s okay to claim sofas, shopping bills, lawnmowers and even the home window cleaners costs as business expenses.\u00a0<\/p>\n\n\n\n

If you follow your mate\u2019s advice, you run the risk of your business being subject to serious<\/strong> fines and sanctions. So here is why you should heed this advice – don’t take accounting advice from your mate down the pub. <\/p>\n\n\n\n

HMRC has strict criteria for business expenses.<\/strong><\/h2>\n\n\n\n

Let\u2019s first look at why<\/em> people want to put all kinds of weird and wacky expenses through their business. Ultimately, the more expenses you have, the lower your profit will be and the less tax you\u2019ll have to pay.<\/p>\n\n\n\n

If you\u2019re scratching your head over whether something can be categorised as a tax-deductible expense, remember the \u2018wholly and exclusively\u2019 rule:<\/p>\n\n\n\n

In order to qualify for tax relief, the expenses you incur must be wholly and exclusively for your business and must be necessary for its operations.<\/em><\/strong><\/p>\n\n\n\n

In other words, summer holidays do not count! Only costs directly related to your business activities and devoid of any personal benefit can be claimed. For more examples of what can and can\u2019t be claimed, check out our blog \u201cWhat counts as an allowable expense<\/a>\u201d.<\/p>\n\n\n\n

Wrongly categorising business expenses will come back to bite you.<\/strong><\/h2>\n\n\n\n

Aside from tax investigations being time-consuming and inconvenient, if HMRC finds anything dodgy in your expenses, you can expect hefty fines and penalties. The ultimate sanction is a fine equalling 100% of the tax, on top of having to pay the actual tax.<\/p>\n\n\n\n

For example, if you try to save \u00a32000 in tax by submitting deliberately misleading business expenses, you\u2019ll have to pay the \u00a32000 tax PLUS a further \u00a32000 penalty on top.<\/p>\n\n\n\n

That\u2019s not all. Once you\u2019ve got a black mark against your name, HMRC will be all over your business. It\u2019s a prompt for them to lift the lid on everything that goes on. What started as an investigation into corporation tax will soon turn into them delving into your payroll, VAT, personal tax affairs and your own income.<\/p>\n\n\n\n

In short, they\u2019ll try to make an example out of you. Taking a shortcut to save a couple of thousand pounds will ultimately cost you so much more. It\u2019s just not worth it.<\/p>\n\n\n\n

You wouldn\u2019t take legal advice from people down the pub.<\/strong><\/h2>\n\n\n\n

If you were speaking to your mate who knows a bit of legal stuff, you wouldn\u2019t take his advice on what to do about a dispute over some land in your garden. You\u2019d seek the expertise of a qualified lawyer, gaining total certainty from their experienced perspective on your circumstances.<\/p>\n\n\n\n

The law is black and white. There are lots of ways accountancy is too, especially when it comes to what can and can\u2019t be claimed as a business expense.<\/p>\n\n\n\n

There\u2019s a lot at stake if anything goes wrong with HMRC, and you need to seek the most reliable, qualified advice to protect your business against anything that could derail it. So – please don’t take accounting advice from your mate down the pub! <\/p>\n\n\n\n

You can\u2019t verify where they\u2019re getting their information.<\/strong><\/h2>\n\n\n\n

As a business owner, you want to be able to sleep at night knowing you haven\u2019t cut any corners. No matter how much you trust your pal or how good his intentions are, you never know how reliable his accountant is. <\/p>\n\n\n\n

He might be getting advice from an accountant who isn\u2019t suitably qualified and who\u2019s inexperienced in expenses. They might actually only specialise in bookkeeping. In fact, he might not even have an accountant. <\/p>\n\n\n\n

By going to a qualified accountant, you\u2019ll have total peace of mind you\u2019re getting the best advice. You won\u2019t have any nasty surprises from HMRC. Don’t take accounting advice from your mate down the pub. <\/p>\n\n\n\n

Assume HMRC <\/strong>will<\/strong> investigate your business.<\/strong><\/h2>\n\n\n\n

When we take on a new client, we encourage them to be of the mindset they\u2019ll have a tax investigation from HMRC<\/a> at some point. If it never happens, great. If it does, everyone\u2019s ready for it.<\/p>\n\n\n\n

Tax investigations can happen for a few reasons:<\/p>\n\n\n\n