Amongst other things, one of the things I have noticed in my new job is invoices have been put on in previous years that shouldn't of been there.
The most prominent is a rates invoice that was entered on the system 2 years ago, the business then got 100% relief, the paper work was sent through (so it should of been credited off), however this invoice just sort of stayed there, got paid from payments taken by the council for the other 2 premises, leaving an outstanding balance on one of the other properties.
Like I say this was about two years ago, year ends have been done, tax due calculated, and then with the next years payments every month they have gone to pay off the previous years outstanding amounts.
I managed to track the error to its source, so do I now credit the amount therefore increasing the liability for this year, or is it more complicated and just tell the accountant and let him sort it?
Putting a dummy credit note through to remove the balance is the only thing that you can do. I would just make a note of what you've done and how the error originated, should your client or the accountant query the reduced rates charge in the profit and loss account this year.
__________________
Pearce & Co - Chartered Accountant and Chartered Tax Adviser
Putting a dummy credit note through to remove the balance is the only thing that you can do. I would just make a note of what you've done and how the error originated, should your client or the accountant query the reduced rates charge in the profit and loss account this year.
Thank you, the client is my boss , I have nowhere near the knowledge or confidence to be self employed. His neice will be in and she is an accountant, I will see if she wants to break the bad news.
I dont quite understand how doing a credit note would increase the liability, surely the liability is, at the moment overstated ( & has been for the last year if its 2 years old) and a credit note will reduce the expense in the rates account, which i would have thought would make your boss smile :)
I dont quite understand how doing a credit note would increase the liability, surely the liability is, at the moment overstated ( & has been for the last year if its 2 years old) and a credit note will reduce the expense in the rates account, which i would have thought would make your boss smile :)
Two years ago he would of overstated his expenses therefore reducing tax liability, (I think). If I now apply a credit, yes his rates reduce, but the £4000 reduction in expenses should increase his liability, unless there is something I,m not thinking about, which wouldn't surprise me,
i see, tax wise yeah it would... i would of thought his profit for the business would be more important for this year, but depends on the person i suppose :) good luck with that one :)
i see, tax wise yeah it would... i would of thought his profit for the business would be more important for this year, but depends on the person i suppose :) good luck with that one :)
The profit for this year is the important bit. He will be in effect increasing it and therefore paying more tax, he won't however see an increase in cash because of it, just pay more tax. I always adjust for the error when showing the creditors balance to him.
, I have nowhere near the knowledge or confidence to be self employed. His neice will be in and she is an accountant, I will see if she wants to break the bad news. 
