Filing tax return, do I include this invoice?

Itsadogslife_2

I am about to file my tax return for the year ending April 2013 and I normally invoice one of my employers monthly. I have invoiced her on the 15th April but this includes work carried out from mid March up until this point - but the invoice is dated after the year end - do I include part of this invoice in the tax return or include the whole invoice in next year's tax return?

ira.hath

Include the whole invoice in next years return.

Pennywise

ira.hath wrote: »

Include the whole invoice in next years return.

No that's wrong advice. For 12/13 and earlier, accounts for SA returns had to be on the "accruals" basis which means your income (and tax) is based on the value of work done in a tax year, whether invoiced or not, and whether paid or not. Therefore, you do have to include the proportion of work completed before 5 April 2013, even if it's invoiced/paid afterwards.

PlutoinCapricorn

If you look at HMRC's guidance notes for the field, you will see that they require the income earned during the tax year, not invoiced or paid. By the time the tax us due, you will almost always have been paid the money owed.

ira.hath

If that is incorrect then I apologise, but I'm pretty sure it's not. Where exactly does it say you need to account for work in progress, and is there any guidance as to how this must be done?

My understanding is that an Accrurals Basis does mean when it is invoiced, it dosn't matter when the work was actually done, as actaually creating and sending the inovice is the relevent piece of work... actually when the work the invoice is for is done is largely irrelevent. The same applies to VAT invoices.

I'm self employed and invoice some of my clients in advance, some on a daily basis and some on a monthly basis... I've always gone from the date on the invoice, and since I started using an accountant they appear to have done the same.
I'll check with them when I go to see them next week.

Pennywise

ira.hath wrote: »

If that is incorrect then I apologise, but I'm pretty sure it's not. Where exactly does it say you need to account for work in progress, and is there any guidance as to how this must be done?

http://www.hmrc.gov.uk/helpsheets/hs222.pdf

nomunnofun

ira.hath wrote: »

If that is incorrect then I apologise, but I'm pretty sure it's not.

I've always gone from the date on the invoice, and since I started using an accountant they appear to have done the same.
I'll check with them when I go to see them next week.

I most certainly would. Pennywise is 100% correct.

ira.hath

Pennywise wrote: »

Can't post links

Do you mean the bit where it says

"Profits which arise from carrying on trades, professions and vocations cannot usually be worked out by simply adding together the cash receipts of the business and deducting expenses paid out. This would show the business’ cash flow, but it would not usually be a proper measure of its profits."?

Surely this is simply saying it does not matter whether things have been actually paid for or not (ie: A Cash Accounting system is not relevent) . I still think that the invoice date is the important part here.

Mistral001

ira.hath wrote: »

Do you mean the bit where it says

"Profits which arise from carrying on trades, professions and vocations cannot usually be worked out by simply adding together the cash receipts of the business and deducting expenses paid out. This would show the business’ cash flow, but it would not usually be a proper measure of its profits."?

Surely this is simply saying it does not matter whether things have been actually paid for or not (ie: A Cash Accounting system is not relevent) . I still think that the invoice date is the important part here.

Have the argument with your accountant. My accountant insists in sticking strictly with the work done and not what I invoice or recieve during the year. It is a pain in the neck to be honest as it is very difficult to administer and it means that often I have to pay tax on work I do before I have received the money I think some accountants do it differently.

nomunnofun

Yes but it works both ways. Similarly you should be including expenditure which you have incurred but have not paid for.
One of the most basic questions an acountant should ask when receiving the books at year end is 'Who owes you?' and 'Who do you owe?'

The rules have never changed. Some of us are old enough to remember that there used to a few trades who were exempt from this accounting treatment. One was barristers (surprise, surprise) and there was an enormous kick up when they were eventually brought into line about fifteen years ago, so much so that the 'extra one-off profits' could be spread over ten years.

Mistral001

nomunnofun wrote: »

One was barristers (surprise, surprise) and there was an enormous kick up when they were eventually brought into line about fifteen years ago, so much so that the 'extra one-off profits' could be spread over ten years.

Yes surprise surprise indeed!! I suppose that was to sweeten the pill of no-win-no-fee when that was allowed a few years ago.