Back to online filing incentives - again!

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
Sorry to go back to this again... :roll:

OK done the journals and accounts look nice with extra income of £250 - all fine and dandy - but -

What about the SA tax return? £250 income shows as income and therefore taxable. Even if I did the computation manually (perish the thought!) when it went through HMRC system it would through up an error as the £250 has not been taxed.

Any thoughts about how to avoid this?

Any help much appreciated.

Claudia

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Back to online filing incentives - again!

    I don't usually do tax returns so i don't know much about this, but this thought has come to mind - perhaps you should show the income excluding the £250 on the SA return - it's tax free income. As a comparrison, you don't include tax free interest income from ISAs in the SA Return.
    I would be interested to read comments from someone more knowledgable than me.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Back to online filing incentives - again!

    I spent hours on the phone to HMRC yesterday about this and ended up speaking to an Inspector. We all agreed that not to show it on SA as tax free income. That then left me with a balance sheet that wont balance :roll: £250 out. The logical thing to do was to net it off against drawings - but not even the Inspector would give me a definitive view on that - all he said was that he wasn't an accountant!!!! I think though that is the only thing to do with it, as putting it anywhere else is patently wrong.

    Anyone with a better idea, please let me know!

    Claudia
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Back to online filing incentives - again!

    When I spoke to a HMRC Inspector about this I was advised to open up a separate account in the nominal ledger and post it there. I just called it filing incentive.

    This way it was easy to see the £250 to be deducted for SA purposes but also mean't my P&L and Balance sheets balance.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Back to online filing incentives - again!

    For individuals, I find the best way to show this is as follows:
    * Include the Online Filing Incentive as usual in Other Income, and therefore it will be included in box 3.50 on the Self Employment pages.
    * Deduct the amount in the Tax Computation, and show it in box 3.71 'Deductions from net profit'.

    This will exclude the £250 from being taxed, but will show the same figures (that will balance) as shown by accounts.

    Hope this helps.

    Tom

Categories

Privacy Policy