Previous period expenses

PoodlePoodle Experienced MentorPosts: 711Registered
Hi

I have a numty who has just bought his box of lose source documents in.

He is a small food retail outlet and included in the box is approx £600 of food costs that he did not bring in last year.

Obviously these are genuine business expenses and I am not sure how to process them now, I see a couple of options.

Include them in this years cost of food - would upset the percentags but clearly since they were missed off last year would this really matter?

Include as an extra expense below the GP line this year

Re do last years accounts SA100 T/O £32K, NP £5K - is it worth it?

Poodle

Comments

  • DiannewDiannew Font Of All Knowledge Posts: 2,814Registered
    Poodle wrote: »
    Hi

    I have a numty who has just bought his box of lose source documents in.

    He is a small food retail outlet and included in the box is approx £600 of food costs that he did not bring in last year.

    Obviously these are genuine business expenses and I am not sure how to process them now, I see a couple of options.

    Include them in this years cost of food - would upset the percentags but clearly since they were missed off last year would this really matter?

    Include as an extra expense below the GP line this year

    Re do last years accounts SA100 T/O £32K, NP £5K - is it worth it?

    Poodle

    This may be a silly question...............but how come it wasn't noticed that they were not entered last year.........how did he pay for them?
  • BIG WALBIG WAL Well-Known Posts: 133Registered
    Hi Poodle,

    I'm very interested to see other opinions on this, as similar situations arise every year with the odd client or two.

    Strictly speaking, I suppose one should ammend the previous year's accounts. I guess it depends on how material you consider the amount involved to be.

    No need to redo the SA100 - in the past a simple letter to HMRC sufficed, providing it's within the ammendment time limit. (12 months after 31st Jan, but I think that's due to change to 12months after date actually filed, but not sure from when).

    Re-doing the accounts would depend on how they were produced and the software used. I use VT Accounts, and it's easy enough to just change the odd figure and print out a new set.


    Usually though, it's not worth my while to bother so I just include it in this year's accounts, providing the GP percentages are reasonable. Maybe I'm missing a trick here though, as there is an opportunity here to charge out for the extra work. (Not unreasonable as it's the client's fault)
  • PoodlePoodle Experienced Mentor Posts: 711Registered
    Hi Dianne

    A totally shoe box situaion where you can only create an income and expenditure account to enable the tax return from what is presented and questions asked.

    I do not think that he has any idea of the concept of filing paperwork I think that it just gets lumped into a pile on the desk until it comes to me, these probably fell on the floor!!

    This is one of the first clients that I had when I started, in the days when you are not too fusy, we all have them.

    Poodle.
  • deanshepherddeanshepherd Font Of All Knowledge Posts: 1,809Registered
    Normally, I would be inclined to add the expenses in the current year. I would exercise a little caution if, as may be the case here, a tax advantage is obtained due to profits being below the personal allowance in the previous year but not in the current year.
  • PoodlePoodle Experienced Mentor Posts: 711Registered
    Hi Dean,

    You are right!

    If these had been included last year they would have made no difference to the outcome of profits below the PA. But there are taxable profits this year above the PA and so to include them this year would reduce the tax liability.

    So I am not going to include them this year but bring this fact to the attention of my client.


    Poodle
  • farmergilesfarmergiles Font Of All Knowledge Posts: 1,693Registered
    I would leave them out and tell the client.
    Not worth altering previous years accounts because it will make no difference. Could also open an investigation if you alter last years accounts.
    Just tell client to get his shoebox in order for next time.
    Merry Xmas
  • JodieRJodieR Experienced Mentor Posts: 1,002Registered
    I would leave them out and say something along the lines of this to the client: '£x of the receipts in your shoebox related to last year. If you would like me to amend your return you will get £x of tax refunded and I will charge you £x to do so'. If they do want to go ahead it is just a matter of writing to HMRC telling them which figures on the return need changing.

    Returns can be amended up to 1 year after the submission deadline - after that you can request for the return to be repaired (I think the word is) due to an error or mistake, but it's at HMRC's discretion whether they do so or not (although I've never seen them not).

    Also point out to the client that this extends the window for HMRC to enquire into their return.

    Jodie
  • JodieRJodieR Experienced Mentor Posts: 1,002Registered
    BIG WAL wrote: »
    Hi Poodle,


    No need to redo the SA100 - in the past a simple letter to HMRC sufficed, providing it's within the ammendment time limit. (12 months after 31st Jan, but I think that's due to change to 12months after date actually filed, but not sure from when).

    I was at a seminar of sorts a while ago and specifically asked this question. I was told that the rules have changed in that HMRC now have 12 months from the date the return is filed to open an enquiry (unless of course they have reason to suspect something's been declared incorrectly), but clients still have up to 31st January to amend their returns. Not sure if the deadline will be 31st October for paper returns though.
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