accounting for purchases from members of public - The Book-keepers Forum (UK)

barbara123 · Newbie

accounting for purchases from members of public

Cheshire · Master Book-keeper

Ask for a receipt.

Plus tell he to get an Accountant before she starts. She can't afford not to.

barbara123 · Newbie

Receipt? if i sold some of my clothes/toys to somebody would i have to issue a receipt? i think she would get a few strange looks if she asked that really..

Artois · Guru

barbara123 wrote:
Receipt? if i sold some of my clothes/toys to somebody would i have to issue a receipt? i think she would get a few strange looks if she asked that really..

I think she may get a few stranger ones from HMRC during an enquiry if she did not get one

You need something to prove that the transaction took place in order to claim it as an expense either as Joanne suggests a receipt or at least a confirmation email from the seller which includes the price, if not I do not see how you can include it in the accounts.

Cheshire · Master Book-keeper

barbara123 wrote:
Receipt? if i sold some of my clothes/toys to somebody would i have to issue a receipt? i think she would get a few strange looks if she asked that really..

So if someone asked you for a receipt you would refuse? On what grounds. Plain awkwardnes. Or tax avoidance.

Exactly right Doug on HMRC, strange looks to be followed by lots of laughing when they disallow a chunk of expenditure and get their sticky mits on a big fat fine and penalties.

VinceH · Expert

The important point is that your friend needs to prove she has purchased the goods. That's kind of fundamental.

However, instead of putting people out and surprising them with a request for a receipt*, do it the other way around: Your friend provides the paperwork that they have to sign to confirm that they have received £x for goods xyz.

She could print up a nice, snazzy looking form with her letterhead etc, fill it in with all the necessary details, get them to sign it, and then give them a copy.

In her own premises she could photocopy the form and give them the copy. But an alternative that would work at her premises and if she visits the sellers is to use carbon paper between the form she's filling out and they're signing, and a copy underneath; they get that one.

Using an off-the-shelf receipt book would probably work, as long as all the necessary details are included - but I think would look less professional in this scenario.

The objective is to get a verifiable proof of purchase.

* Doing it that way, people might still be surprised if they thought they were selling to an individual rather than a business, but at least your friend will be prepared, so they aren't put on the spot looking for a pen, paper, etc.

pictures · Senior Member

Back in the days whjen I was self employed I often bought stuff from members of the public or market stalls for business use. (basically I ran kids drama classes so used to buy second hand costumes, props, dressing up outfits etc).

Getting a receipt was never a problem. If the details were sketchy as in the recipt from a local market stall for 30 pairs of legwarmers (Cats the musical costumes) I used to write a note on the receipt of what the items were.

barbara123 · Newbie

Cheshire wrote:
barbara123 wrote:
Receipt? if i sold some of my clothes/toys to somebody would i have to issue a receipt? i think she would get a few strange looks if she asked that really..
So if someone asked you for a receipt you would refuse? On what grounds. Plain awkwardnes. Or tax avoidance.
Exactly right Doug on HMRC, strange looks to be followed by lots of laughing when they disallow a chunk of expenditure and get their sticky mits on a big fat fine and penalties.

HI Cheshire

no it's not about refusing or being awkward at all, and definitely not about avoiding tax as you don't have to pay tax when you sell some of your baby's clothes to someone as you sell them at a loss.
It's about being surprised and not knowing what to do. Being a person who does not have anything to do with accounting, business etc if someone came to my house to buy some of my old stuff and asked for receipt I would just not know what to do. I would not know what the receipt should include etc that's what I meant about getting some strange looks as I guess most people would be the same. My friend does not want to do anything illegaly or avoid any tax, she just wants to start getting little income for herself and tbh i don't think she will have much tax to pay at all. Most of all she would not want to risk getting fined by HMRC. Also she would not be wondering and asking how to account for these purchases. That's why she asked me and that's why I came here asking for advice.

Thank you for your input

barbara123 · Newbie

VinceH wrote:
The important point is that your friend needs to prove she has purchased the goods. That's kind of fundamental.

However, instead of putting people out and surprising them with a request for a receipt*, do it the other way around: Your friend provides the paperwork that they have to sign to confirm that they have received £x for goods xyz.

She could print up a nice, snazzy looking form with her letterhead etc, fill it in with all the necessary details, get them to sign it, and then give them a copy.

In her own premises she could photocopy the form and give them the copy. But an alternative that would work at her premises and if she visits the sellers is to use carbon paper between the form she's filling out and they're signing, and a copy underneath; they get that one.

Using an off-the-shelf receipt book would probably work, as long as all the necessary details are included - but I think would look less professional in this scenario.

The objective is to get a verifiable proof of purchase.

* Doing it that way, people might still be surprised if they thought they were selling to an individual rather than a business, but at least your friend will be prepared, so they aren't put on the spot looking for a pen, paper, etc.

Thank you VinceH that's the advice I was looking for, that's brilliant thank you. Will definitely tell her to look into something like this. One more question if I may please - would she have to put on the receipt full details of the person she is buying from? Like name, address etc? what other details would be necessary - obviously price and type of goods, date, anything else?

Thank you

Cheshire · Master Book-keeper

barbara123 wrote:
HI Cheshire

no it's not about refusing or being awkward at all, and definitely not about avoiding tax as you don't have to pay tax when you sell some of your baby's clothes to someone as you sell them at a loss.
It's about being surprised and not knowing what to do. Being a person who does not have anything to do with accounting, business etc if someone came to my house to buy some of my old stuff and asked for receipt I would just not know what to do. I would not know what the receipt should include etc that's what I meant about getting some strange looks as I guess most people would be the same. My friend does not want to do anything illegaly or avoid any tax, she just wants to start getting little income for herself and tbh i don't think she will have much tax to pay at all. Most of all she would not want to risk getting fined by HMRC. Also she would not be wondering and asking how to account for these purchases. That's why she asked me and that's why I came here asking for advice.

Thank you for your input

Firstly this is a site for professional bookkeepers and accountants to exchange ideas, not for members of the public to get free advice. That said you have had some free advice, although it did come across as you deriding the idea I made in my first post, despite all my colleagues agreeing with me. That is the problem with asking such via google - you cannot have a proper two way conversation so that your queries are dealt with, as you can by having a professional on your books.

Also the problem is - one question is NEVER just one question and you/she will have more over the coming weeks and we are in business to make money, something you say your friend wants to do. (By the way if she is only paying a small amoyunt of tax then her business will not really be successful as its an indicator of profit)

I dont understand why your 'friend' is not able to ask such questions herself as if she is not confident enough to even do this at this stage of her business then she will struggle with being a business owner the further in she gets. This is a pretty basic question and whilst I understand you dont have the necessary accounting qualifications I can only suggest you look at the receipts you handle on a day to day basis to get some ideas - eg your supermarket receipt, the ones you get when you buys clothes online from a proper clothing retailer, the gas or phone bill you have been sent etc. Also the receipt books themselves will guide you as to the information you need. Get a duplicate or even triplicate receipt book. One for the seller, one for you and one for your accountant. Eg

https://www.amazon.co.uk/127x203mm-Duplicate-Invoice-Single-DCU5842/dp/B008HGK4KU/ref=pd_bxgy_229_img_2?_encoding=UTF8&pd_rd_i=B008HGK4KU&pd_rd_r=ce00c631-77a0-11e8-860a-3568273fff2b&pd_rd_w=d0IRW&pd_rd_wg=kCkDt&pf_rd_i=desktop-dp-sims&pf_rd_m=A3P5ROKL5A1OLE&pf_rd_p=3332058357179395958&pf_rd_r=VPCE160NQ7YA8Q6KKGN6&pf_rd_s=desktop-dp-sims&pf_rd_t=40701&psc=1&refRID=VPCE160NQ7YA8Q6KKGN6

If you or her want to upskill yourselves enough to be able to deal with such things, with or without strange looks, then you/her need to get some advice from those consultants/ companies that provide it - there are plenty about still despite the downturn in the economy, who give free courses on setting up a business and the basics you need to know. Start with Blue Orchid https://blueorchid.co.uk/business-start-up/

But also she MUST get herself an Accountant who will guide her as well and will be willing to answer the basic and more complex questions that will arise and BEFORE she starts the business so the structure and processes etc are right from the start and she doesnt get in a mess.