The importance of Receipts

Most business owners are aware that they need to keep receipts if they want to secure a deduction for expenditure for business tax purposes, assuming that the expenditure is allowable for tax purposes.

This is particularly important if you purchase an asset: a vehicle, equipment, computers and so on, as these can be high value items and the loss of tax relief would be significant.

Property owners, who would be subject to Capital Gains Tax (CGT) when the property is sold, are in a similar position.

Although they may keep the receipts for annual expenses that they write off against rents received they should also keep adequate records if they improve their property. Improvement costs are generally taken into account when the property is sold – they reduce any CGT payable.

Imagine, therefore, the consternation of Mr Tobias Ridpath who was denied CGT relief for expenditure on his properties for this reason. Here’s an abridged version of the comments made by the Judge in her summing up.

“We can see it is very likely the Appellant (Mr Ridpath) incurred some expenditure on the properties. The difficulty is that we have no idea how much was spent. We are invited to find that some or all of the bank withdrawals were used in this way. The appellant was unable to point to a single item and explain by way of illustration how the money leaving his account had been spent. [He was given] ample opportunity to provide evidence of expenditure. Indeed we can see that the Appellant was treated very tolerantly... We have no idea why the Appellant was so vague about the expenditure. It is impossible for us to conclude, ..., that he spent some reasonable figure on these works and then guess how much that is or accept what seems to us equally to be guess work by the Appellant about the expenditure.

It is very unfortunate that the Appellant was unable to provide some details of expenses but that was not the case and we have no alternative but to dismiss the appeal.”

Property owners should carefully document any improvements to their properties and keep the records to present to their advisors when the calculation of any capital gains on sale is being considered. In the absence of evidence, it is likely, as Mr Ridpath discovered, that tax relief for capital expenditure will be denied.