Home For accounting professionals Tax
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚

Tax and accruals

miniminimouseminiminimouse Just JoinedRegistered Posts: 3
Hi there,

My client is sole trader. His financial year ends 31 July and he wanted to know about taxation.

The question is:
if he receives an invoice in July but pays it in August, then for the taxation purposes, will it reduce his tax amount for this year or for the next one when the payment is made?

Many thanks in advance



  • truecockneytruecockney Feels At Home Registered Posts: 93
    For corporation tax purposes, it will reduce liability for the current financial year.

    For VAT (if charged) it depends solely on whether they are accounting for VAT on an accrual basis, or a cash accounting basis. If it's an accrual basis, then they will reduce the amount payable for the accounting quarter. If on a cash accounting basis, he would reclaim the VAT once the invoice is paid.
  • BluewednesdayBluewednesday Font Of All Knowledge Registered Posts: 1,624
    The client is a sole trader so corporation tax doesn't apply.

    However accounts are still prepared under the accruals basis which will be how he is taxed so yes it's allowable for tax too
Sign In or Register to comment.