Self Assessment
kelsmick
AberdeenRegistered Posts: 89
Hi All,
I'm wondering if someone can give a bit of advice.
I have been approched by someone to do a tax return. They started their self employment in April 15 however she has told me that people had paid her at the end of march for her services (She is a dog walker so is paid in advance for services) Although she didn't start working until the current tax year she was paid in the previous so i'm a little confused as to if she would need to declare the income she received in March as her dates for self employment wouldnt be until April 15.
Any advice would be great.
Thanks in advance,
Kelsey
I'm wondering if someone can give a bit of advice.
I have been approched by someone to do a tax return. They started their self employment in April 15 however she has told me that people had paid her at the end of march for her services (She is a dog walker so is paid in advance for services) Although she didn't start working until the current tax year she was paid in the previous so i'm a little confused as to if she would need to declare the income she received in March as her dates for self employment wouldnt be until April 15.
Any advice would be great.
Thanks in advance,
Kelsey
www.essencebookkeeping.co.uk
Comments
Burg
Now back to the real issue, true, common sense in relation to time/money can be applied but when you have a tax inquiry, you will find that hmrc only sticks to the facts. Re obligation to file, if you don't report that you are trading, there'll be no reason for the hmrc to issue a notice. That's no excuse.
Re deferred income and P/L, I didn't say it will hit the P/L, I said it should be reported in the accounts. Even non-accountants know that DI goes on the balance sheet. Do you have a link to what you stated, ie, no point in tax return if there's no accrued income. Wonder how that stance plays out if cash accounting is used.
You appear to be in an argumentative mode but I prefer to engage with those who don't comment anonymously. I stand by every comment I make and will readily be called out on any. What about you? Care to reveal your identity? It's been an excellent month, don't spoil it. Have a great and productive new year.
No profits and no net liability to income tax for the year (as the income is deferred) = no requirement to notify chargeability.
I'd argue that until she starts to provide services (in the new year) she's not trading (possibility of pre-trade expenditure but nothing more) therefore again no requirement to notify. This is a point of case law and is not always clear cut, especially in service industries (it could also be argued that placing an advert to provide services marks the start of trade, rather than actually beginning to provide the services), so we'd have to know all the facts to make a best judgment. However given the very small amount of tax we'd be talking about (unless she's walking the Queen's corgis) I doubt very much HMRC would deem it worthwhile to argue the point.
Of course if the trade DID begin in 14/15 she would have had to notify self-employment by 5 October 15 to avoid penalties. So in the client's interest without clear legislation to the contrary I'd be going for 15/16.
We will not always agree on certain things, but so long as respect and proper dialogue is maintained, then I personally think it is healthy to a have a nice accounting debate.... Bravo to phoenixd and mrmr89, like lisajayne said, I also thoroughly reading the feeds lol
Now back to the post...
I was just wandering if the client could use the revenue recognition rule to justify that the income is actually for the April 15 tax year.
Isn't it right that, the accounting principle is that revenue should only be recognise when all the risk-in this case (providing the service of walking the dog) and rewards (getting paid for it) have been met. The client has been paid for it (rewarded) but no service has been performed and thus the risks still remains.
Therefore, in my view there is no sales to recognised until the service is perform and definitely no tax to pay. The payment would simply be recognise as deferred income (DI) in the 14/15 tax year. This is could be perfectly justified if HMRC were to make an enquiry.
I maybe wrong but these is something I just remembered from the top my head so don't quote on me it mrmr89 lol. Perhaps, I ought to do some recap on revenue recognition principle.