Tax return question - net profit

[Chris71]

What's the minimum of expenses I would need to show to keep HMRC happy on a sole trader tax return?

Based on what my accountant did last time, I assuming my net profit is simply gross profit minus:

• Cost of goods and services to the business
• Mileage

Obviously, there are other things I could add, but I'm looking to show the highest possible net income figure to support a mortgage application. (My overheads are genuinely very low, I hasten to add - I travel a fair amount, but it's usually free of charge, the rest of the time I just work from my spare room. I don't even have a dedicated work phone line...)

So:

1) Is there anything else I would need to show as a bare minimum of expenses?
2) Do I include VAT on the goods and services? Presumably I give the full upfront cost (i.e. if a printer cartridge is £20 on the shelf that's what I put down, it's not a percentage figure or anything odd like that?)
3) What's the lowest rate I can use for mileage? I think my accountant charged it at 10p/mile last time - presumably as a token figure to show there was activity taking place

Incidentally, if anyone is wondering why someone so clearly financially inept isn't leaving this to his accountant... I did send him all the figures a fortnight ago and explained it was an urgent thing to support a meeting with the broker. He now appears to have gone on holiday for the next fortnight and is likely to be my ex-accountant when he returns, so if anyone reading this is a chartered accountant specialising in sole traders feel free to drop me your details.

[Chris71]

thebraketester said:

Minimum? I wouldn't worry about minimum. If you claim for very little, you'll be paying more tax.... I cannot see them grumbling about that.

That was my thinking, but my accountant insisted on submitting some degree of expenditure so it didn't look out of the ordinary to HMRC. Like I say, my overheads are virtually non-existent anyway - and as you mention, this way I will give them more money - so there's nothing dodgy as such.

I will get a proper accountant to go over the figures before I actually submit anything, I'd just like a bit of advice on how I could generate a realistic estimate in the meantime.

[Chris71]

Eric Mc said:

HMRC expects you to tell the truth. So, if you have legitimate business related costs - claim them.

Your accountant should elaborate on what can be claimed.

However, if you decide you want to pay more more tax and Class 4 NI than you really have to, that's your choice.

Don't forget, accounts are not just for tax purposes. How do you know if your business is worthwile if you aren't bothering to account properly for the costs the business is incurring.

He's not around to "elaborate on what can be claimed" which is why I'm asking if anyone can help me calculate my own estimate. Rest assured, I will get someone who knows what they're doing to do the final figures.

My accountant is a fellow of Institute of Chartered Accountants and was more than happy to submit my previous tax return on this basis. All the basic costs are reflected, I just asked him to minimise the expenses where it was acceptable to do so. I'm doing this for a mortgage application.

All the above is moot, to be honest. I'm not looking to debate the wisdom of what I'm doing.

To simplify the questions:

1) Do I include VAT on the expenses for goods and services? (I'm not VAT registered, so I presume I just put the full receipt price down?)
2) Under instruction to minimise expenses, my accountant put mileage through at 10p/mile. I think, it certainly wasn't the full 45p/mile allowed by HMRC. Is there any significance to this figure (like a minimum amount set by HMRC or something)?
3) Are costs and mileage just a straightforward subtraction from the gross figure? I take it there aren't any convoluted rules where I only deduct costs after a certain threshold or charge a percentage or anything like that?

[Chris71]

Marcellus said:

Surely continuity and consistency comes in somewhere?

ie this year you should be accounting for things in the same way you did last year and the same way you will next year.

I would have thought that you're more likely to raise HMRC questions if last year you made £20k, this year £50k ( mortgage co application) and next year £25k.

IANAA BTW

True. We applied exactly the same process when we did the 2015-2016 tax return back in January.

This year is going to show a substantial increase, but that's largely because last year was my first year of trading and I started a couple of months into the tax year.

Fortunately 'said accountant discovered the documents he'd meant to send me in his outbox, so it's all been sorted professionally now. Panic over.