MacDougall & Co
Chartered Tax Advisers


The Most Simple Bookkeeping System in the World

We call it "Envelopes"

The object of this basic method of bookkeeping is to:

Provide an annual summary of expenses broken down into categories, and

Provide an ‘audit trail’ so that you can show evidence for each expense that you claim

You need half a dozen or more envelopes, a biro, and a calculator.

Each envelope should be labelled with; your name, the accounting period, and a category of expenditure.  For example:

"John Smith       Year to 31 March 2011             Telephone"

Each time you spend money on which you wish to claim tax relief, place the invoice/receipt in the relevant envelope.   At the end of the accounting period, add up the contents of the envelope and write the value on the envelope.   For example:

"John Smith       Year to 31 March 2011            Telephone         £370"

Lost Receipts: when you realise that you have lost a receipt (or you have forgotten to ask for one) make a note on a piece of paper and place this piece of paper in the envelope instead of the lost receipt.   DO NOT try to make this piece of paper look like a receipt.   That might be misinterpreted as false accounting by the Revenue.   The piece of paper should show DATE, ITEM PURCHASED, FROM WHOM PURCHASED, COST, and REASON (ie original lost).

No Receipt Issued: some items, for example car tax (VED) and car insurance often seem to be purchased without a separate receipt being issued.  Make a note, as above.

If in Doubt About An Item Put the receipt in a separate envelope labelled something like

"John Smith       Year to 31 March 2011            Questions for accountant"

If you do this efficiently, and while your circumstances don’t change, my fee should remain at £240 for completing your tax return.

Disclaimer This system will not be suitable for everyone   It is only suitable for very small businesses   It will almost certainly not be suitable if you are registered for VAT - the possible exception being if you are using the flat rate scheme    If you have any doubts about the suitability of this system for you please seek the advice of a suitably qualified person.

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