Despite how clear the criteria may seem, though, the devil is in the detail.
A cost can be offset if it is necessary for the business and it is documented by a valid invoice.
If finding a valid invoice may be challenging at times, proving that the expense is necessary for the business can be even more.
One may be convinced to have valid reasons to include a particular expense however it needs to be noted that if the tax authority questions an expense the kind of evidence that is accepted is that which conforms to law, the same sort that would be necessary to present in a court.
Our series of articles “Expenses difficult to Justify” discusses some common cases.
Sometime, based on our experience, we may advise not to include a particular expense for one of the following reasons:
It is not properly documented.
- Bank statements are not valid document for an expense. (It is for an income, though!).
- Your invoices are in the wrong name.
- The purchase was done before the registration of the business.
There is not enough evidence that it was necessary.
- A flight and hotel cost for a “business trip”.
It does not harmonise with the business pattern.
- Higher expense in petrol than would be expected in view of the incomes obtained.
In cases like these, your accountant may consider that it is not advisable to try to offset the cost.
If you disagree and still would like to include it, after providing written authorisation, we will include it in your tax preparation.
By doing this, consequently, you will assume the responsibility of any penalty or additional cost of addressing the request of additional information or any other administrative job derived from it.