I've been asked to do a self assessment return for someone that is in the CIS scheme. I've never understood how these people are not employees, but that's besides the point.
What I want to know is this - this return is for the year ending 5th April 2010. My invoice to him will be raised in December 2010 - but should this go into the figures for y/ending 05-04-10 as an accrued expense?
I'm confused. The work hasn't been done in that year but the expense relates to that year.
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Never buy black socks from a normal shop. They shaft you every time.
It took me a while to get my head round accruals when I started.
You're right, because your invoice is to do with work relating to the 05/04/10 accounts, you are fine to accrue for the expense in the accounts. You will simply reverse the accrual next year and put in the correct invoice amount.
I can grasp the idea of say electricity being used in the final month of the year but the invoice not being received until two months later. But this is actual work being done after the year ends although it relates to the year. This is what I am having difficulty getting my head round.
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Never buy black socks from a normal shop. They shaft you every time.
Perhaps it might help to think in terms of "period" costs, it doesn't matter when the work is physically done but more importantly the period to which the work relates.
Or perhaps I've confused you more ;)
-- Edited by ADAS on Monday 6th of December 2010 04:15:10 PM
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Just had a thought - is my fee even allowable on his return?
I'm in two minds about this.
If an accountants fee is allowable when calculating corporation tax then surely my fee should be allowed when calculating profits from self employment?
But then there was the fuss with the MPs claiming accountants fees when doing their tax returns - I know it isn't exactly the same but enough to put doubt in my mind.
I really should know the answer to this considering I have passed the ICB exam in self assessment returns.
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Never buy black socks from a normal shop. They shaft you every time.
If your accountancy fee is apportioned between the work for the year end accounts and the self-assessment tax return, then the tax return element is not allowable. It should be added back on the tax computation.
Some accountants state that they prepare the tax return for free and therefore all of the accountancy fee is allowable. Not sure how HMRC would view this under investigation though.
For companies it is different as there is no personal usage. It is all a business expense.
For self-employed people (sole-traders, partners etc), accountancy fees 'are' allowable, including the preparation of the tax return.
Individuals that are required to complete a tax return, a director, employee, other individual with a chargable event (basically non-self-employed), accountancy fees relating to the preparation of the tax return are 'not' allowable.
This I imagine is the reason that MPs got in trouble. Guess it should have been a benefit in kind.
