Keeping receipts may feel like a small administrative task, but they play an important role in supporting your business accounts and VAT returns.
A bank statement can show that money left the business bank account, but it does not always prove exactly what was purchased, whether the cost was wholly for business purposes or whether VAT was charged.
So, what happens when a receipt is missing? Can the expense still be included in the accounts, and can the VAT still be reclaimed?
Why Are Receipts Important?
Receipts, invoices and other supporting documents help demonstrate:
- what was purchased;
- when the purchase was made;
- who supplied it;
- how much was paid;
- whether VAT was charged;
- whether the purchase was for business purposes;
- whether the cost can be included in the accounts.
The stronger the supporting records, the easier it is to prepare accurate accounts and answer any questions raised by HMRC.
Receipts are particularly important for VAT registered businesses because a valid VAT invoice or receipt is normally required before input VAT can be reclaimed.
Where Should Receipts Be Recorded?
Where possible, a receipt or invoice should be uploaded and attached to the relevant transaction in the bookkeeping software.
For example:
- an unpaid supplier invoice should normally be entered as a purchase invoice or bill;
- a purchase paid immediately by bank card should be attached to the relevant bank transaction;
- a cost paid personally by a director may need to be posted to the director’s loan account or included in an expense claim;
- a cost paid personally by a sole trader may be recorded as a business expense funded through capital introduced;
- a large item of equipment may need to be recorded as a fixed asset rather than a general expense;
- a sales invoice should be entered in the sales section.
Attaching the document to the correct transaction creates a clear audit trail and makes the bookkeeping easier to review.
What Counts as Suitable Purchase Evidence?
The best evidence will usually be a full invoice or receipt from the supplier.
Other evidence may include:
- a simplified VAT receipt;
- an emailed receipt;
- a supplier statement;
- an online order confirmation;
- a payment confirmation;
- a contract or agreement;
- a bank or card statement;
- a note explaining the business purpose of the purchase.
However, not all evidence is sufficient for every purpose. A bank statement may help prove that a payment was made, but it may not show what was purchased or whether VAT was included.
Can an Expense Be Claimed Without a Receipt?
A missing receipt does not automatically mean the expense must be excluded from the accounts.
Where the payment is clearly business related and there is other supporting evidence, the expense may still be included.
For example, the bank statement may show a payment to:
- a regular trade supplier;
- an insurance company;
- a software provider;
- Companies House;
- HMRC;
- a fuel station;
- a recognised business service.
In these circumstances, the transaction may still be recorded as a business expense. However, a note should be added explaining what the payment related to and why it was incurred.
The business purpose must still be clear. A payment appearing on the bank statement is not enough on its own if the transaction could have been personal.
Can VAT Be Reclaimed Without a Receipt?
Usually, VAT should not be reclaimed without a valid VAT invoice or VAT receipt.
For example, suppose a business pays £120 to a supplier but cannot obtain the receipt.
The transaction may be recorded as:
- Business expense: £120
- VAT reclaimed: £0
This means the full payment is included as a cost, but no VAT is claimed on the VAT return.
This is normally the safest treatment because HMRC expects businesses to keep proper evidence to support VAT claims.
A bank statement, supplier statement, pro-forma invoice or delivery note will not normally replace a valid VAT invoice.
Can Alternative Evidence Be Used?
HMRC may consider alternative evidence in exceptional circumstances, but this should not be treated as standard practice.
Alternative evidence may be considered where there is sufficient proof that:
- the goods or services were supplied;
- the supplier charged VAT;
- the supplier was VAT registered;
- the purchase was for business use;
- the business attempted to obtain a valid invoice;
- there is no risk of VAT being claimed incorrectly.
However, relying on alternative evidence creates additional risk. The normal approach should always be to obtain a proper VAT invoice from the supplier.
What Should You Do When a Receipt Is Missing?
Before treating a receipt as permanently lost, consider the following steps:
- Search your email inbox for a digital receipt.
- Check your online account with the supplier.
- Ask the supplier for a duplicate invoice.
- Check whether the receipt has already been uploaded to the bookkeeping software.
- Review the bank or credit card statement.
- Add a clear note explaining what the purchase was for.
- Confirm whether there was any personal use.
- Do not reclaim VAT unless there is suitable evidence.
Many suppliers can provide duplicate invoices, even several months after the original purchase.
What About Personal and Mixed: Use Expenses?
Where a cost has both business and personal use, only the business element should normally be claimed.
Common examples include:
- mobile phone bills;
- home internet;
- vehicle costs;
- fuel;
- travel;
- software subscriptions;
- working from home costs.
The same principle applies to VAT. A business should only reclaim VAT relating to the business proportion of the cost.
For example, if a mobile phone is used 70% for business and 30% personally, the claim may need to be restricted to the business proportion.
What Are the Risks of Reclaiming VAT Without Evidence?
If VAT is reclaimed without proper supporting evidence, HMRC may:
- disallow the VAT claim;
- require the business to repay the VAT;
- charge interest;
- consider penalties where reasonable care was not taken.
One missing receipt is unlikely to cause the same concern as a repeated pattern of unsupported transactions.
Regularly missing invoices or reclaiming VAT without evidence can suggest that the bookkeeping controls are not working properly.
A sensible general rule is:
No valid VAT invoice means no VAT should normally be reclaimed.
How Long Should Receipts Be Kept?
Business and VAT records generally need to be retained for at least six years.
Digital copies are normally easier to store, search and attach to accounting transactions than paper receipts. This is particularly useful because printed receipts can fade or become damaged over time.
Uploading receipts regularly also reduces the amount of work required when preparing a VAT return or year-end accounts.
Best Practice for Business Receipts
Good record keeping does not need to be complicated.
Businesses can reduce missing receipt problems by:
- using a dedicated business bank account;
- paying business costs directly from the business account;
- uploading receipts as soon as purchases are made;
- forwarding emailed invoices into the bookkeeping software;
- attaching each invoice to the relevant transaction;
- avoiding personal payments for business costs where possible;
- checking missing receipts before each VAT return;
- reviewing incomplete records before the year end.
A regular monthly check is usually easier than trying to find a year’s worth of missing receipts at once.
Final Thoughts
A missing receipt does not always prevent a cost from being included in the business accounts.
Where the purchase is clearly business related and supported by other evidence, the expense may still be recorded. However, VAT should normally not be reclaimed unless a valid VAT invoice or receipt is available.
In simple terms:
The business expense may still be allowable, but the VAT claim requires stronger evidence.
Keeping receipts attached to the correct bookkeeping transactions creates a clear audit trail, improves the accuracy of the accounts and reduces the risk of problems if HMRC reviews the records.
This article provides general guidance only and does not constitute personalised tax advice. The correct treatment will depend on the individual transaction and the evidence available.
