Financial year end?

[QwertyBerty]

Hello,

My financial year end is 31 March. If I work during March but invoice for it in April do the earnings for March have to go on the P&L account ending 31 March 2008? Or can they go on the P&L account ending 31 March 2009?

Also do the CT rates run from 6th April to 5th April?

Thanks,

QB

[Nixon Williams]

The work done in March should be included in the accounts to 31st March, even if the invoice is raised in April.

I am aware of some "accountants" who only take notice of the invoice date, although this is incorrect, it does happen.

Corporation tax periods start on 1st April each year. If your year end is not 31st March you would have two periods with possibly different tax rates for each part of the company year.

Alan

[Lewis]

The work done in March should be included in the accounts to 31st March, even if the invoice is raised in April.

I am aware of some "accountants" who only take notice of the invoice date, although this is incorrect, it does happen.

Corporation tax periods start on 1st April each year. If your year end is not 31st March you would have two periods with possibly different tax rates for each part of the company year.

Alan

I thought that when using cash accounting you use the dates that invoice payments hit your bank account, certainly when calculating my VAT each quarter this is what happens. Would there not be a discrepancy between the VAT and accounts if you are not consistent?

[QwertyBerty]

I thought that when using cash accounting you use the dates that invoice payments hit your bank account, certainly when calculating my VAT each quarter this is what happens. Would there not be a discrepancy between the VAT and accounts if you are not consistent?

AFAIK VAT does work on the invoice date. I have called VAT helpline in the past and they confirmed it. So I will be paying the VAT for March's work as part of the Q2 return since I will invoice in April.

[QwertyBerty]

The work done in March should be included in the accounts to 31st March, even if the invoice is raised in April.

I am aware of some "accountants" who only take notice of the invoice date, although this is incorrect, it does happen.

Corporation tax periods start on 1st April each year. If your year end is not 31st March you would have two periods with possibly different tax rates for each part of the company year.

Thanks, Alan. Your answer confirmed my gut feeling.

QB.

[r0bly0ns]

I thought that when using cash accounting you use the dates that invoice payments hit your bank account, certainly when calculating my VAT each quarter this is what happens. Would there not be a discrepancy between the VAT and accounts if you are not consistent?

Yep, but since when has that mattered to the Government?

Our company year end is 31st March, Financial Year end is 5th April and VAT year end is 30th April

Company Accounts are calculated on invoice date, VAT returns are calculated on payment date

[ASB]

Accounts are - as far as I aware - always accrual based.

work in progress is an asset, thus it is booked as a sale in the account period in which the work was done (as explained by Alan).

There is however a potential get out.....

Irrespective of whether the work is invoiced or not you need to consider whether it will be paid in full, or may later be written off - in full or in part.

If you can genuinely say "it's a major risk of non payment" then you could make a provision for it as likely bad debt. If it miraculously gets paid then you can unmake the provision. It would not be unheard of for accountants to get a little creative in this area, perhaps when the net shareholders funds negative and some more income would be useful. A strong justification is needed though.

The only reason I can see for wanting to defer corporate income is to delay paying the CT on it for another year.

If you are very quick you could extend the accounting period by up to 6 months - but then I imagine you would be in precisely the same position at the end of the extended accounting period (and you have some other things to worry about in the meantime).

[QwertyBerty]

Thinking about this some more, I guess the employee's salary & PAYE & expenses for March have to go into the P&L account as well along with VAT for that month despite these transactions having tax points beyond the end of the financial year end! And then all these extra figures need to go on the Balance Sheet for 31 March...?

[Sockpuppet]

Yes. But VAT doesn't enter the P&L.

Its BS only as a Liability.

[QwertyBerty]

Yes. But VAT doesn't enter the P&L.

Mmm. Because I'm on the Flat Rate Scheme it seems logical for me to include sales VAT on the P&L along with my VAT liability. Then the difference drops out nicely as profit.