Help with tax implications of prepayments

[KatyMac]

I normally get paid a month in arrears by the council

From April I will be getting 60% of the money due for April - Aug before 1st April & 40% in July

The 60% will be for the following year (12-13) but paid in this year (11-12)

Is there anyway I can put the income into next years accounts or allow for it?

I'm sure our various accounts will be around soon, but I have been previously told, by my accountant, that it goes by date of invoice, not date of money received.

So I assume you've invoiced the whole amount this year? Then I think it has to be on this year's tax return.

Again, have no idea if that is true!!!!

Strictly speaking the income MUST go into next year's accounts if it is for services to be provided next year.

If you have a problem balancing up your accounts (I presume you don't normally do a balance sheet), just use the following calculation, starting with the total Receipts for the period from your bank statement/cash book. Note that b/fwd stands for "brought forward" and is the amount of any deferred income or debtors that you took into account at the end of last year.

Receipts for the period
Add deferred income b/fwd
Less deferred income
Less debtors b/fwd
Add debtors
-------
Income for the period

See? I'm wrong! I knew MrAnchovy would be along, though, to correct me.

I need it to go in next years accounts as I'll have to pay next years wages out of it

But HMRC say if it arrives in this year it must go in this years accounts it might mean I have to pay tax this year

It's more my self assessment form that is the problem really

Idiots. The only people allowed to compute their profits on a cash basis are barristers and underwriters.

Everyone else is required (by Finance Act 1998 S42) to compute their profits using 'generally accepted accounting practice'. There is a big section of the HMRC manual on it.

A more succinct reference is BIM31031 which states "receipts are recognised as they are earned" (as opposed to when invoices are raised or payment received).

it's HMRC who are the idiots of course, not you dear

So do I just put it as turnover on next years self assessment

Yep. If you want you can do a reconciliation like the one I posted earlier in both this year's and next year's accounts.

I was on the phone to them for 43 minutes this morning & then they got it wrong!

Many thanks and chocolate/wine/flowers (please delete as required)