Q&A on tax returns for 167,000 self-employed building workers

Heather Dore who works as a Regional Manager at Easy Accountancy answers some commonly asked questions from her self-employed clients. 

I am paid a mixture of cash, bank transfers and cheques. How would you recommend I record my cash income in case I am investigated by HM Revenue and Customs (HMRC)?

Whatever form your income takes you must record your income. I recommend keeping a spreadsheet to record all income and expenditure and updating it at least once a week. You should also keep copies of any sales receipts or invoices for seven years as they can be used as proof of income. 

As a construction worker I am required to wear protective clothing whenever I am on site. Are these items eligible to be claimed as business expenses?

A business expense is a cost that is solely and exclusively for business purposes. Some clothing items such as branded uniform or in this case protective clothing can be classed as an expense, which means that you will not pay tax on these costs.

When completing building work I invoice my clients a total amount, which includes the cost of labour and materials. When I fill in my tax return is my income the total amount or just the amount for labour?

When completing your tax return your income should be the total amount that you have been paid by your clients over the year including labour and material costs. The cost of building materials should then be noted on your return as an expense, which will then be deducted from your total turnover for the year.

How do I claim a cost as a business expense?

The process of claiming a business expense is very straightforward. Simply note your total business expenses for the year on your tax return. Your total expenses for the year will then be deducted from your total turnover to give your total taxable income. You will therefore not incur tax on your business expenses.

When is the tax return deadline?

The deadline for the impending 2013/14 tax year is 31^st January 2015.

What happens if I do not submit my tax return by the deadline?

The deadline for paper tax returns is October 31^st. If you were planning to submit a paper return and you missed this deadline then you must submit your return via the online form on the HMRC website. The deadline for online returns is January 31^st and if this deadline is not met you will incur a penalty of £100. 

If you have not submitted your return three months following the initial deadline you will incur further penalties of £10 for each day that your return continues to be late up to a possible total of £900 or 90 days. 

If your return is six months late you will incur a further penalty of £300 or five per cent of your tax bill, whichever amount is greater.

If your return has still not been received by HMRC 12 months after the initial deadline your will incur another fine of either £300 or five per cent of the total tax due. If your return continues to be late then you could be liable for further penalties depending on your situation.

What happens if I cannot pay my tax bill by the deadline?

If you are unable to pay your tax bill you should contact HMRC and explain the reasons why as you could be able to agree on a deadline extension or to pay your bill in instalments.

If you fail to pay your tax bill on time without warning HMRC first you will be liable to penalties.

HMRC will usually charge interest on unpaid bills. If your bill has not been received by February 28^th, a month after the deadline, you could incur five per cent interest. If your tax bill has not been received by July 31^st then you could receive a further five per cent penalty.

For those who have still not paid their tax bill a year after the deadline you could incur a penalty, which is equal to the amount of unpaid tax.

Am I able to amend my return once it has been submitted?

You are able to edit your return if it has already been submitted. The deadline for amends is 12 months following the tax return deadline.

To amend a return that has been submitted online you will need to log into your online account on the HMRC website.

To edit a paper return that has already been submitted you should send the updated pages to HMRC with a note to say that you would like to make some amends.  

How do I know if HMRC are planning to investigate my return?

If HMRC decide to look into your tax return you will be contacted in writing within 12 months of HMRC receiving your return.

In the case that you have edited your return or submitted your return late, HMRC are entitled to a window of 12 months and up until the next “quarter day”. Quarter days are January 31^st, April 30^th, July 31^st and October 31^st.

How long should I keep expense receipts and proof of income for?

It is recommend that you keep copies of your records, in particular sales receipts, invoices and expense receipts for seven years in case HMRC ever ask to view them. 

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