Which tax year is this expense ?

Adly812

I have an invoice for an allowable expense to deduct from my income. The invoice date from the management company is 5/04/21... however it has been debited from my bank account on the 6/04/21... as the 5th was a Sunday ?

Which year should I include this expense for on my SA?

This tax year 20/21 I was heavily impacted by the virus restrictions, so my earnings were so low they fall well within my tax threshold. 

So if I have to choose to out this expense into next years accounts it would probably help me out better. However should I go with the invoice or the bank statement? 

Pennywise

Depends what basis you're on, i.e. cash basis or "normal" basis.  If cash basis, it's payment date that matters.  If normal basis, it's when the expense arose and whether any of it relates to a different period and needs accrual or prepayment.

Adly812

It’s a service charge which is a prepayment bill , the management has sent the bill in advance, tax year 20/21 , but the bill is for work which will be carried out only later. I  paid it on 6 April from my bank account and it’s shown up on my online portal service charge history statement being paid  on the 5 April ? 

maisie_cat

Having left your bank account on 6th April the expense will fall into 20/21 regardless of whether you are using cash or accruals accounting

Jeremy535897

5 April 2021 was a bank holiday, so it is likely that the payment was made on 6 April. If this is correct, then the expense should be claimed in 2021/22, because:

• it was paid in 2021/22 (if you use the cash basis); or
• it is a prepayment for work to be done in 2021/22 (if you use the traditional/accruals basis)

If, somehow, the payment was made on 5 April, and you use the cash basis, it should be claimed in 2020/21, assuming your year end is 5 April. If you use the traditional/accruals basis, it would still be claimed in 2021/22.

Adly812

It was paid on Sunday, but your right it came out my bank and is reflected on the Monday (6th) .

I use the cash basis method and look at the period of what actually comes in and out that period.

My call with HMRC obviously just got me confused, as she said to use the invoice date..

but if I’m using the cash basis method, then I guess I look at my bank statement ... so it should be in the 21/22 year ... confirm ?

[Deleted User]

Monday was the 5th (Easter Monday) and a bank holiday. It came out of the bank on the 6th, Easter Tuesday and not a bank holiday.

From what you have said, and ignoring HMRC 🤔, 2021/22 it is then.

Jeremy535897

[Deleted User] said:

Monday was the 5th (Easter Monday) and a bank holiday. It came out of the bank on the 6th, Easter Tuesday and not a bank holiday.

From what you have said, and ignoring HMRC 🤔, 2021/22 it is then.

Indeed. I am a bit baffled by HMRC's reference to "invoice date", as this is one piece of information that does not matter at all, whichever accounting method is used.

Adly812

Forgive me .yes 5th was a Monday indeed, and a holiday which is why It came out on the Tuesday the 6th so I was confused what to go with on this at first 

Jeremy535897

HMRC says:

‘Received’ and ‘paid’

The business can treat income as received and expenses as paid at the date of its choosing, as long as the treatment is consistent. For example, an expense may be paid when a card payment is made, or on the date that entry is shown on the bank statement.

From https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim70005

Adly812

Perfect thank you so much !!!