Recived payment in advance - which tax year?

tyllwyd

I'm trying to fill in my self-assessment tax return but I'm confused over one payment ....

I'm a freelance editor, so usually I receive a piece of work to carry out, it takes two to four weeks to complete, then I invoice at the end of the job.

Last year (Feb 2011), one of my clients paid the same invoice twice - totally their mistake, and they decided to keep the overpayment as a credit against my name, to be deducted from the value of any future invoice that I sent to them. That was fine, but the next few pieces of work I did were smaller, so in the end I had submitted three invoices before the total came to more than the original overpayment. One of those invoices was in the 2010-11 tax year, and the other two were in the following tax year.

When I come to do my tax return, do I include the whole amount of the overpayment in that tax year, or only the amount that relates to the actual invoices that I submitted in that tax year? At the end of the tax year, I had completed all the work that they had given me up to that point, so there wasn't any work in hand that straddled the two tax years, just this overpayment credit.

Any advice gratefully received!

chrismac1

You include only income which corresponds to WORK DONE by the year-end. There are other posts which also deal with this on the site. To summarise:

1. A contract allows you to invoice ahead £10k on 5 April 2011 in order to procure equipment. This invoice is raised on 5 April, but the entry is moved from sales to Deferred Income (balance sheet) in the accounts - hence does not form part of profits before tax.

2. On another contract, you invoice £10k on 6 April 2011 for March 2011 work. In your accounts to 5 April, you add £10k to sales and £10k to Accrued Income in the balance sheet, so this £10k does for part of profits before tax.

tyllwyd

Thanks! - that makes me feel more confident about what I'm doing!