A bit of a tricky one this. I have a client who lets out a furnished holiday cottage on FHL basis. I've previously treated it on a non cash basis because there are furnishings fittings etc to take into account.
He uses a a well known holiday booking website but their dates on the invoices are all over the place, using the booking date rather than the payment date Got one dated 2015 because that's when the holiday was booked, so obviously I can't use the invoice dates.
So two options. Use cash basis but lose capital allowances (basically replacing new for old now so not necessarily needing (vast majority this years was bedding plus the odd things like kettle etc, about £350 in total so could put them through PL?
Or use payment dates and ignore cash basis so CA can still be claimed (not sure if I can even do that)
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I have a million and one questions, which may not help you but give some food for thought and hopefully encourage the debate. Am also between cooking and sorting hospital visiting and can't locate my glasses (despite now having two pairs so I've always got some!!) so will apologise now for typos.
I'm assuming he meets the criteria for fhl, especially as it's you John.
In random order
Does the come under property for cash basis accounting?
Has the draft consultation re cash basis for landlords now become law? If so, does it cov the period you ar covering?
Is there any chance whatsoever that this client may need to go back to accruals basis if you do change and what impact could it have long term?
When you say he gets paid one day after the letting, I'm assuming this is by the booking agent, as you wouldn't let someone move in without coughing up the dough?
Does he get deposit monies? Or just the balance less their commission?
Would the monies be classed as received by the holiday letting agent be classed the same as having been received by a normal property lettings agent, ie even if cash based, if they received it in 2015.......hmmm.
Wondering why (and this should probably be number one in the Qs list) they would back date an invoice to 2015 if the letting was only occupied now. Hence my earlier question about deposits?
Have you spoken to the booking company and challenged their practices? (Only asking as I did something similar with a restauarant bookings thing and discovered I had been told a pack of incorrect info by my client and was able to highlight misinformation, ie a load of bobbins, on their website. Sometimes it's won speaking to the horses mouth. Plus you can tell them that they cannot issue invoices in 2018 that are dated 2015! Although good luck with that one cos apparently Scottish Powe can do it as well!
You would need to convert the existing accruals basis across, might impact quite considerably on his financials.
Is there. Ay you can see what is happening via the booking agents without the invoices?
Sorry! That's probably not all of my ponderings but alarm on my cooker is going off and I'm starving!!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Does the come under property for cash basis accounting?
Yes, income is under 15k
Has the draft consultation re cash basis for landlords now become law? If so, does it cov the period you ar covering? Cash basis becomes default from 2017-18, I'm doing 2016-17
Is there any chance whatsoever that this client may need to go back to accruals basis if you do change and what impact could it have long term? Doubtful, the lettings and expenses are very straight forward.
When you say he gets paid one day after the letting, I'm assuming this is by the booking agent, as you wouldn't let someone move in without coughing up the dough? Yes
Does he get deposit monies? Or just the balance less their commission? Balance less commission
Would the monies be classed as received by the holiday letting agent be classed the same as having been received by a normal property lettings agent, ie even if cash based, if they received it in 2015.......hmmm. See next question
Wondering why (and this should probably be number one in the Qs list) they would back date an invoice to 2015 if the letting was only occupied now. Hence my earlier question about deposits? I booked a chalet two years ago from the same company, and, from memory, a deposit was made at the time of the booking.
Have you spoken to the booking company and challenged their practices? (Only asking as I did something similar with a restauarant bookings thing and discovered I had been told a pack of incorrect info by my client and was able to highlight misinformation, ie a load of bobbins, on their website. Sometimes it's won speaking to the horses mouth. Plus you can tell them that they cannot issue invoices in 2018 that are dated 2015! Although good luck with that one cos apparently Scottish Power can do it as well! It would have been no later than April 2017, but thinking about it, could have been as early as April 2016 (will check tomorrow) I should have said, the invoices are for the commission, and are issued when the payment is made, but dated at the time of the booking or deposit.
From what my client has said, he has difficulty getting through to them, they are an online company
You would need to convert the existing accruals basis across, might impact quite considerably on his financials. Yes, I thought about that, however there are only a couple of accruals per year.
Is there. Ay you can see what is happening via the booking agents without the invoices? No
I found this tonight which, if I've interpreted it correctly, means it shouldn't matter about income accruals.
Rent is not brought into a years tax computation merely because it is received in the year or because it is due to be paid in the year. Equally, rent is not excluded merely because it is received outside the tax year or it is due outside the tax year. The proportion of the rent which is earned in the year from the tenants use of the property in the year should be brought into the profit and loss account and the proportion which is earned from the tenants right to use the property outside the year should be excluded.
Am I right in assuming that rental is included in the year that the holidaymaker lets the property, so even if the invoice says 2015, I place it in the accounts on the date the letting takes place?
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Sorry John my typing without glasses failed at the first question. Was meant to be does fhl come under property for cash basis?
I was pondering due to the it's not property but it is property, it's a trade argument that always rages with fhl (accounts v tax model) but I was being a umpteen anyway as in the absence of it not being specifically mentioned as being out with the property rules then it must be included. Indeed had it been mentioned then it would've been covered by the trade rules, who have of course had the option to use the cash basis for longer.
I am confused by this old invoicing lark (sorry being thick!). You mentioned it was balance less commission, then later mention you yourself paid a deposit, then later that the invoice contains their commission, so can you confirm what exactly is on the invoice/statement from them. Does it just show income collected, less their commission and the balance that then shows in the clients account? Do they get a separate invoice for deposits, less commissions? Just trying to understand the funds and invoice flow.
I did think it might be finance act 2017 but I can't stand property stuff so avoid it like the plague (even in banking, I refused to work in the property team, just do the one offs!), but I do recall adding something about the opt in out process being less clear if they have other trades. Does he just have this one business? If not I will try to find it, plus some other bits later.
Sorry for sued response
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Sorry John my typing without glasses failed at the first question. Was meant to be does fhl come under property for cash basis?
You can use cash basis for FHL up to £15k from 2013. Client is under that by 2k
I am confused by this old invoicing lark (sorry being thick!). You mentioned it was balance less commission, then later mention you yourself paid a deposit, then later that the invoice contains their commission, so can you confirm what exactly is on the invoice/statement from them. Does it just show income collected, less their commission and the balance that then shows in the clients account? Do they get a separate invoice for deposits, less commissions? Just trying to understand the funds and invoice flow.
Sorry for confusing you. My client has given me a downloaded statement that shows the letting dates, client name and amount he will receive after commission. He only gets the money the day after the property is let. My client has also given me a pile of invoices (see attachment for the 2015 one, which shows the commission the website takes. Looking at the 2015 one, it was raised in October 2015 for an August 2016 letting!! I can only think they raise the invoice when the booking invoice is made or the deposit paid, which may be the same time. It would appear that the website hangs on to the deposit then pay the client just after the letting date.
I did think it might be finance act 2017 but I can't stand property stuff so avoid it like the plague (even in banking, I refused to work in the property team, just do the one offs!), but I do recall adding something about the opt in out process being less clear if they have other trades. Does he just have this one business? If not I will try to find it, plus some other bits later.
Just this one business, plus pensions and savings etc.
Sorry for rushed response
No apology needed, I appreciate you taking the time out, thank you.
In the last post I provided a link to HMRC regarding recording the income in the classed as being received in the year the letting is made. Is my interpretation correct do you think?
EDIT: forgot to add attachment
-- Edited by Leger on Tuesday 23rd of January 2018 06:40:10 PM
Hi John
Sorry its taken a while - not been around for a few days.
The quote you mention is saying rental income is based on an accruals basis, which is what you have been using.
I was pondering more on the mechanics of how the hell do you find out what is going on if you only get the info given your earlier 2015 comment.
So contractually, if someone pays their balance in full and then changes their mind about the holiday what is the refund policy? What amount would your client get if they cancel and at what stage would they get those funds/how would they know about cancellations? What happens to such commission fees in that event.
To be honest, I dont know if Im over complicating things in my head, but going back to your original post and to double check - was this invoice for the commission received back in 2015? Because if so then you know what is due in using this and combined with presumably the other documents/reports from the holiday bookings company confirming the bookings for the period ahead and therefore when they are due. Or have I lost it altogether?
I think I would be ringing that number on the bottom of the invoice, or emailing them with some questions or better still maybe even go and sit with your client whilst he logs into the site and you can interrogate the reports and information available.
Apologies - probably more of a hindrance than a help!!!!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I'll pick this back up next week if that's ok? Suffice to say that the accounts are wrong but the self assessment is correct. You've raised a few more questions in my head but good questions which are worth debating.
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
