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?

Assuming the answer to 1 is 'yes':

2) In the 1st year (in which the invoice was issued), the company made a 
profit. If there was reason to assume that the company might make a loss in 
the subsequent year, would it be prudent to account for the invoice in the 
second year to reduce the likelyhood of corp tax being liable on the full 
amount of that invoice?


I'm sure the answer to those is not going to be as simple as I hope.

Regards,

Vince

On Fri, 16 May 2008 14:04:05 +0100, "Connected"
 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) )
 ( ) . ( )
 (")_(")

"Alan Ferris"  wrote in message 
news:osfr24hatld8ortdhgsfep9ob6e4tck0rk@4ax.com...
> On Fri, 16 May 2008 14:04:05 +0100, "Connected"
>  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

On Fri, 16 May 2008 20:06:19 +0100, "Connected"
 wrote:

>
>"Alan Ferris"  wrote in message 
>news:osfr24hatld8ortdhgsfep9ob6e4tck0rk@4ax.com...
>> On Fri, 16 May 2008 14:04:05 +0100, "Connected"
>>  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.  

I fail to understand why you want your accounts to show estimates
rather than you actual liability.  If you get caught by HMRC you will
have additional interest and possible penalties for not showing the
correct figures in your accounts.

--
Alan "Ferrit" Ferris

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

Alan Ferris wrote:
> On Fri, 16 May 2008 20:06:19 +0100, "Connected"
>  wrote:
> 
>> "Alan Ferris"  wrote in message 
>> news:osfr24hatld8ortdhgsfep9ob6e4tck0rk@4ax.com...
>>> On Fri, 16 May 2008 14:04:05 +0100, "Connected"
>>>  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) )
>  ( ) . ( )
>  (")_(")

On 16 May, 22:22, Nick  wrote:
> Alan Ferris wrote:
> > On Fri, 16 May 2008 20:06:19 퍝, "Connected"
> >  wrote:
>
> >> "Alan Ferris"  wrote in message
> >>news:osfr24hatld8ortdhgsfep9ob6e4tck0rk@4ax.com...
> >>> On Fri, 16 May 2008 14:04:05 퍝, "Connected"
> >>>  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?

Much as it grieves me to defend Gerbil...he said:

"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."

Your suggestion:

"...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?"

...is not what he was saying.

A Sale occurrs at the moment it happens legally. All the costs
associated with that sale (under the Matching Principle) occur at the
same moment.

On Fri, 16 May 2008 22:22:35 +0100, Nick 
wrote:

>Alan Ferris wrote:
>> On Fri, 16 May 2008 20:06:19 +0100, "Connected"
>>  wrote:
>> 
>>> "Alan Ferris"  wrote in message 
>>> news:osfr24hatld8ortdhgsfep9ob6e4tck0rk@4ax.com...
>>>> On Fri, 16 May 2008 14:04:05 +0100, "Connected"
>>>>  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?

If invoiced late then it is accounted for in the Work In Progress.
There are new rules on accounting for WIP.

>> 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?

No he clearly states he told his accountant he wanted the figures put
back to match the amount he had paid:

"I said I wanted the original figures back to ensure that the corp.
tax I had already  paid was correct."

Now that could be the agent is saying he needs to pay less, or pay
more.  Either way I wonder why he wishes to  change the accounts to an
estimate?

>> 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.

Which are based on the accounts.....

--
Alan "Ferrit" Ferris

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

Alan Ferris wrote:
> On Fri, 16 May 2008 22:22:35 +0100, Nick 
> wrote:
> 
>> Alan Ferris wrote:
>>> On Fri, 16 May 2008 20:06:19 +0100, "Connected"
>>>  wrote:
>>>
>>>> "Alan Ferris"  wrote in message 
>>>> news:osfr24hatld8ortdhgsfep9ob6e4tck0rk@4ax.com...
>>>>> On Fri, 16 May 2008 14:04:05 +0100, "Connected"
>>>>>  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?
> 
> If invoiced late then it is accounted for in the Work In Progress.
> There are new rules on accounting for WIP.
> 

So basically the answer is yes it should be accounted for in the period 
the work is done not period of the invoice date. My example being a 
consultant who bills the client monthly at the end of the month but 
actually issues the invoice at the start of the next month. I had always 
assumed because the invoice date fell in the next year I could choose 
which year to account for it. It appears I was wrong.


>>> 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?
> 
> No he clearly states he told his accountant he wanted the figures put
> back to match the amount he had paid:
> 
> "I said I wanted the original figures back to ensure that the corp.
> tax I had already  paid was correct."
> 

Yes sorry I wasn't thinking. I was thinking he wanted him to put the 
original corporation tax estimate figure in the accounts to match the 
payment he made when what he actually wanted was for him to change the 
turnover figure to the estimate.

On Sun, 18 May 2008 12:02:22 +0100, Nick 
wrote:

>> If invoiced late then it is accounted for in the Work In Progress.
>> There are new rules on accounting for WIP.
>> 
>
>So basically the answer is yes it should be accounted for in the period 
>the work is done not period of the invoice date. My example being a 
>consultant who bills the client monthly at the end of the month but 
>actually issues the invoice at the start of the next month. I had always 
>assumed because the invoice date fell in the next year I could choose 
>which year to account for it. It appears I was wrong.

Now even if some of the work is complete and can be identified, you
have to account for that WIP even though you may not be issuing the
invoice till months after.

It brings the matching principle onto more equal ground for the
varying types of business.  Though it is still not perfect.

--
Alan "Ferrit" Ferris

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

"Alan Ferris"  wrote in message 
news:n76034lk6r98ma951bk2740an3miaobci7@4ax.com...
> On Sun, 18 May 2008 12:02:22 +0100, Nick 
> wrote:
>
>>> If invoiced late then it is accounted for in the Work In Progress.
>>> There are new rules on accounting for WIP.
>>>
>>
>>So basically the answer is yes it should be accounted for in the period
>>the work is done not period of the invoice date. My example being a
>>consultant who bills the client monthly at the end of the month but
>>actually issues the invoice at the start of the next month. I had always
>>assumed because the invoice date fell in the next year I could choose
>>which year to account for it. It appears I was wrong.
>
> Now even if some of the work is complete and can be identified, you
> have to account for that WIP even though you may not be issuing the
> invoice till months after.
>
> It brings the matching principle onto more equal ground for the
> varying types of business.  Though it is still not perfect.
>
> --
> Alan "Ferrit" Ferris
>
> ()'.'.'()
> ( (T) )
> ( ) . ( )
> (")_(")

Hi all, Thanks for your replies. FYI - I didn't want the accounts changed 
back to the actual estimate. I wanted the accounts to be based on the 
figures that the accountant had originally used to get that estimate (but 
obviously accurate - not an estimate).

When I had originally asked him why the second corp tax calculation was 13% 
higher than the estimate, he told me he had accounted for things in a 
different way. I requested that he account for things in the original way 
(that the estimate was based on) and he said OK, and came up with a corp tax 
figure slightly less than the estimate, so I was happy that I had paid the 
tax man enough money. So he appears to have had a choice somewhere in how to 
account for things.

The next tax year, my company made a loss, so I assume that the net effect 
was that something has been shifted out of a profitable year into a loss 
making year, so overall corp tax for the 2 years would be less???

Sorry to sound so thick. Unfortunately I am unable to discuss this with my 
accountant. Hence the questions here.

Vince

On Sun, 18 May 2008 19:55:18 +0100, "Connected"
 wrote:

>Sorry to sound so thick. Unfortunately I am unable to discuss this with my 
>accountant. Hence the questions here.

Why not?  That is what you pay him for.

--
Alan "Ferrit" Ferris

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

Alan Ferris wrote:
> On Sun, 18 May 2008 12:02:22 +0100, Nick 
> wrote:
> 
>>> If invoiced late then it is accounted for in the Work In Progress.
>>> There are new rules on accounting for WIP.
>>>
>> So basically the answer is yes it should be accounted for in the period 
>> the work is done not period of the invoice date. My example being a 
>> consultant who bills the client monthly at the end of the month but 
>> actually issues the invoice at the start of the next month. I had always 
>> assumed because the invoice date fell in the next year I could choose 
>> which year to account for it. It appears I was wrong.
> 
> Now even if some of the work is complete and can be identified, you
> have to account for that WIP even though you may not be issuing the
> invoice till months after.
> 
> It brings the matching principle onto more equal ground for the
> varying types of business.  Though it is still not perfect.
> 


Thanks for the explanation.