Re: Invoice issued in one year and settled in the next - corporation tax?

Alan Ferris wrote:
On Fri, 16 May 2008 20:06:19 +0100, "Connected"
<someone@xxxxxxxxxxxxx> wrote:

"Alan Ferris" <hairy.ferrit@xxxxxxxxxxx> wrote in message news:osfr24hatld8ortdhgsfep9ob6e4tck0rk@xxxxxxxxxx
On Fri, 16 May 2008 14:04:05 +0100, "Connected"
<someone@xxxxxxxxxxxxx> wrote:

Hi all,

A couple of (probably naive) questions:

1) If an invoice is issued towards the end of a tax period isn't paid until
the next tax period, can it be accounted for (for corp tax purposes) in
either year
No.

The invoice is accounted for in the 1st year:

Cr Sales
Dr Debtor.

Then payment is accounted for in the following year:

Dr Bank
Cr Debtor


--
Alan "Ferrit" Ferris

()'.'.'()
( (T) )
( ) . ( )
(")_(")
Thanks,

What about the second question? I guess the amount of the invoice would be used in the subsequent year's corporation tax calculation..

The reason I ask is this:

Last year my accountant gave me an estimate of corporation tax, which I paid. Then he prepared the accounts and susbsequently gave me a much higher figure for corp. tax. He said he had included some other figures. I said I wanted the original figures back to ensure that the corp. tax I had already paid was correct. So he changed the accounts to make it so. I thought that the issue had hinged around an invoice that had been issued late in the year as I described above.

Does it seem feasible that he somehow had the flexibility to account for the payment in either of the 2 years?

Vince

You cannot just decide when to account for an invoice. You must
account for it in the year to which the income was earned, not paid.


Do you mean you *must* account for it in the period that the actual work was done as opposed to the period that the invoice was dated/issued?

Often invoices are issued in arrears so an invoice date may occur in a subsequent trading period to the work it relates to. Are you saying that despite this the invoice must be allocated to the earlier period?

I fail to understand why you want your accounts to show estimates
rather than you actual liability.

That isn't what he said. He said the accountant gave him a corp tax estimate, presumably in order to make a payment. The deadlines are such that the payment deadline is before the account deadline, which is before that CT600 deadline. I thought it common to have an estimate in the accounts?

If you get caught by HMRC you will
have additional interest and possible penalties for not showing the
correct figures in your accounts.


Surely HMRC will take the figures from the CT600.


--
Alan "Ferrit" Ferris

()'.'.'()
( (T) )
( ) . ( )
(")_(")
.

Relevant Pages