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deposits

tinajanine65tinajanine65 Settling In NicelyRegistered Posts: 21
I would appreciate your thoughts please. We have a carpenter who has taken and banked deposits totaling £7,000
before his year end, but the work is not being carried out until after his year end. If the deposits are included in
income it will put him over the VAT threshold. I have been given conflicting advice, some say it should be included insales as he has received the money, another person says to put it as a creditor.

Your advice would be much appreciated.

Comments

  • JodieRJodieR Experienced Mentor Registered Posts: 1,002
    Both advice is somewhat correct...
    * If the work hasn't been started yet then from an accounts point of view the £7200 should show as 'income received in advance' and not included in sales until the period in which the work is done.
    * From a VAT point of view the date which counts as a VAT point is usually the earliest of (a) when the work is complete (b) when the invoice is raised and (c) when the money is received. You may want to look up exactly how these rules are applied, but I would guess that in your case rule C will apply and the vat point will be in the old year.
    Remember that if the VAT threshold is exceeded in any 12 month period you need to register, not just if it's exceeded in your financial year.

    jodie
  • tinajanine65tinajanine65 Settling In Nicely Registered Posts: 21
    Thanks for that speedy response Jodie. As we only receive the records after his year end do you have a system for the client to use in order for them to keep an eye on their VAT threshold limit?
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