Assign Income to Accounting Year Received

[Cirrus]

For VAT you can choose to pay according to what money you actually received during the quarter in question rather than when such flows were invoiced, so for the last week's work in a month you could assign that to the month you worked or the following month when they paid you (as long as you are consistent).

As my accounting year starts in June, and I intend not to be working in June onwards, it would suit me to have the last May invoice to be assigned to next year's accounts on the basis it didn't get paid until into the new year. This would make it easier for me to pull another £40k out of the company into my SIPP and get £8k CT relief.

Do you know if that is allowable? I could see they wouldn't like that because unlike VAT you have scope to reduce CT. Bear in mind my accountant only gets my transaction lists so he wouldn't automatically know which year the payment was invoiced.

[Fred Bloggs]

I don't know about legality per se. But if the time sheets, invoices, bank statements and company accounts all tie up and show no irregularities, then what's to stop you?

[ASB]

No it is not allowable. Accounts need to be prepared on an accrual basis and work in progress shoul he valued appropriately.

Though i am certain what you describe happens regularly. If you haven't invoiced then who is to know...

In any event you should still be able to make the pension contribution. It will just affect the time at which ct relief is obtained.

[Cirrus]

In any event you should still be able to make the pension contribution. It will just affect the time at which ct relief is obtained.

The trouble is you have zero turnover, you pay out £40k and then you ask for £8k CT refund. My accountant felt such situations may get you noticed by the Revenue - better to have some turnover to make it look like an active, trading company.

However I keep thinking if we ever got to the point that they said "You shouldn't have done this", it wouldn't make any difference because I'm not actually avoiding any tax. The fact they were asking me would mean I was under the spotlight, which I was trying to avoid, but it wouldn't be this that was the problem. It would be IR35...

[NotAllThere]

If you're already on cash accounting then it's fine. Otherwise not. You can't change your accounting practices once you've started (easily), and I believe there are restrictions on who's allowed cash accounting.

[missinggreenfields]

If you're already on cash accounting then it's fine. Otherwise not. You can't change your accounting practices once you've started (easily), and I believe there are restrictions on who's allowed cash accounting.

https://www.gov.uk/simpler-income-ta...use-cash-basis

If you're operating via a limted company, you can't use cash accounting - so I guess that puts an end to the idea.

[ASB]

If you're already on cash accounting then it's fine. Otherwise not. You can't change your accounting practices once you've started (easily), and I believe there are restrictions on who's allowed cash accounting.

Unfortunately one of the major restrictions is any incorporated body.

the cash basis introduced in fa 2013 is fairly restricted.

[ASB]

The trouble is you have zero turnover, you pay out £40k and then you ask for £8k CT refund. My accountant felt such situations may get you noticed by the Revenue - better to have some turnover to make it look like an active, trading company.

However I keep thinking if we ever got to the point that they said "You shouldn't have done this", it wouldn't make any difference because I'm not actually avoiding any tax. The fact they were asking me would mean I was under the spotlight, which I was trying to avoid, but it wouldn't be this that was the problem. It would be IR35...

Well yes. But I am assuming your may invoice is for somewhat less than 40k so you are going to have the issue to a certain extent anyway.

edit: What is not particularly clear is whether you have stopped trading or not. Whether from June that's it and going forwards you are just going to be extracting the funds or whatever, or whether this is a temporary thing.

In the former case you might struggle with getting CT relief at all since it is probably not for the purpose of trade given there is no trade (I'm not certain on how much carry back if any is allowed). Obviously you can commit a few technical offences of false accounting to "move" a portion of this years turnover into next year to give the illusion of trading. But it probably won't really pass any scrutiny should that occur.

In the latter case you will be making money later in the financial year ? So you will be ok with the pension contributions. If cautious don't make it until you have actually generated the turnover later in the year.

Hingsight s a wonderfult thing, but if you had planned ahead a bit more you could have paid 40k into the sipp in April - this year - but dstill have that in this trading year which would be much less hassle (though profits still need to be apportioned across the tweo financial years pro-rate and this would have been much more usual).

[Lance]

perhaps you're over thinking this.

What if the services you are delivering aren't completed till the 1st June? You couldn't invoice before then anyway. Problem solved.

[missinggreenfields]

perhaps you're over thinking this.

What if the services you are delivering aren't completed till the 1st June? You couldn't invoice before then anyway. Problem solved.

If all the work is completed on June 1st then that's fine. If not, then you would have to account for the portion of work that was done in the company year.