Will HMRC Accept Scanned Receipts for Business Expenses?

Many organisations and businesses in the United Kingdom are confused about whether they need to keep paper photocopies of all receipts, or will Her Majesty's Revenue and Customs (HMRC) agree to take scanned copies. In most of the cases the answer, typically, is a Yes – HMRC does accept scanned copies! There are no rules on how an organisation must keep their records. The records can be kept on paper, or digitally or stored in a software program (such as an accounting or book-keeping software). Although there is no rule on how the records must be kept, however, HMRC can charge penalty if the records are not readable or not complete or inaccurate. Businesses should try and get as many copies as possible, for instance, ask suppliers for a duplicate invoice, banks for copies of statements etc. In case a business owner or management can’t recall the actual figures, then in such a scenario they can use ‘estimated’ or ‘provisional’ figures – ‘provisional’ means the business will be able to get paperwork to approve the figures later; ‘estimated’ means the business will not be able to approve the figures

Earlier, it used to be that HMRC only accepted hard photocopies of any documents that were used to support and prepare a set of limited company accounts. However, with technology advancement, software and hardware have the capability to take excellent photocopies of official papers and HMRC has started to accept electronic photocopies as an alternate to original records. There are exemptions to this rule, for instance, documents received from banks etc. which indicate a deduction of a direct tax. Such documents will have to be held in the actual format as they were received – these documents will take account of dividend income and interest. It must be noted that, if, the original/actual document received was an electronic file such as a Portable Document Format (PDF) then that will be accepted.

Also Read: Guide on Expenses and Receipt

Rules of Electronic Copies of Documents

• Maintain back-up of electronic copies for 6 years, post completion of the accounting period – similar to hard-copies, HMRC expects an organisation to maintain 6 years of electronic archive documents. A business must maintain records if:
  • The documents show a transaction that includes more than one of the business’ accounting periods
  • Details about fixed assets – something the organisation has bought, that is assumes to last for more than 6 years, such as machinery or equipment
  • Copy of company tax return that was sent late to HMRC
  • HMRC has initiated a compliance check into the company’s tax return

  An organisation must keep accounting records that consist of:

  • All money transaction received and paid out by an organisation
  • All goods purchased and sold
  • Particulars of assets possessed by an organisation
  • Details of debts an organisation is indebted or is payable
  • Stock at the end of a financial year
  • Details of suppliers and customers (unless the business is a retail outlet)
• Have a proper back-up process and ensure that the data is suitably and securely backed-up. It is essential that the backup system is tough to cover most awful scenarios – it is advisable to maintain a blend of off-site and local hard drive back-ups along with cloud-based storage systems
• All copies should be readable; it is imperative to ensure that the photocopy of each document is of high-quality so that all the actual information can be decoded. Also, make sure that the information, which may be significant, on the reverse side of the papers is copied too

Employer’s Prspective

Employers must maintain a record of all benefits and expenses for employees – these can include company cars, childcare, travel and entertainment, and health insurance. Employers offering business expenses for workforce maybe required to pay National Insurance (NI) and tax on them. The description of a business expense is, fundamentally, something necessary for an employee in order to complete or perform their job. If an individual is self-employed or manages his/her own limited company, then the person may be able to subtract some trade costs from pre-tax profits. Allowable expenses consist of:

1. Advertising and marketing expense
2. Travel expenses
3. Pensions
4. Office costs
5. Staff salaries
6. The cost of buildings
7. Sub-contractors

With the United Kingdom Government’s drive to digital transformation and investment in developing modern digital workplace, HMRC has started to accept scanned photocopies, and documents from mobile apps. The Government is encouraging the use application programming interfaces (APIs) of cross-cutting platforms (e.g. Gov.Verify, Gov.Pay and Gov.Notify), by internal information technology departments or by the broader supplier community. These platforms will often be part of a core system, for instance, human resource, case management, finance, and debt collection. By acknowledging this trend, Capgemini has set up a platform engineering unit within its HMRC account – dedicated to the public sector – designed to attract different people with different career aspirations, who favour an engineering-led environment; there are currently 100 people in the unit. As government transforms, platform possibilities will grow. The growing ubiquity of high-speed internet, predominantly the acceleration of mobile internet, is driving live interactive experiences online and facilitating collaboration on large files instantly. As technological capabilities and comfort using them grow, so will the range of things that can be done Digitally Together. Being Digitally Together is also driven by the comfort around digital sharing and the growing number of things that can be done online

HMRC’s move in the direction of electronic expenses reporting is a forward-looking business decision. Through cloud-based software and applications, statements and balances can be downloaded from these applications at a glance, and financial records can be locked or topped up at the click of a mouse. Another, simple option is a scan business expenses into pdf files and a system of electronic dossiers to put in order the pdfs. Most cloud based accounting software enable scanning a document in pdf files

Top Tips for Business Expenses Receipt

1. Ensure that both sides of the document are scanned, if necessary
2. Make certain that the documents are backed up, preferably in multiple ways
3. Make sure that the scanned copies are legible, before getting rid of the original ones

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.