Hello Forum, I have a small self-employed business and do my own accounts which is not normally a problem, but this year I've hit a small snag that is now troubling me. Last March I arranged some insurance through a specialist broker which became active at the end of March (i.e. during the 2016-17 accounting year), however the broker did not invoice me until well into April, i.e. the following tax year. The simple question is, can I include this in my 2016-17 accounts on the date the service was supplied to me, or does it have to go in the following tax year on the date it was invoiced? I'm sure this probably accounting 101, but I just don't know. Please help. Andy
UK When to enter item into my accounts?
- Thread starter Andy2018
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If you're doing accrual accounting then it doesn't really matter when it was invoiced, it's the period over which the service applies that is relevant. So if your accounting year runs to end of March, then you'd apportion the cost of the insurance cover, assuming 12 mths, over 1 month in 2016/17 accounts and the rest in 2017/18 accounts.
If you're talking about your tax return, then you might be able to use cash accounting for a small business whereby you declare income and expenses in the tax year that they are received/paid, rather than the conventional method of accounting whereby you have to adjust your profits for tax purposes. You can check directly with HMRC if your business is eligible for you to submit a cash accounting return.
If you're talking about your tax return, then you might be able to use cash accounting for a small business whereby you declare income and expenses in the tax year that they are received/paid, rather than the conventional method of accounting whereby you have to adjust your profits for tax purposes. You can check directly with HMRC if your business is eligible for you to submit a cash accounting return.
Thank you for the clear response Fidget. I'm using accrual accounting (had to look up the definition) so the first part of your answer applies. Is it normal to apportion items in the way you describe when the expense of paying for them occurs as one charge, i.e it's paid annually not monthly? For example, should the same principal apply to other annual services that are paid up front such as domain names and web hosting?
Yes. It's called Prepayments (which basically means payment up front for something that will be provided to you over an agreed future period), so you apportion the cost across the periods/months that you will be getting the service for in your accounts rather than just show the full amount in a single period that the service started in or was invoiced in.