self-employment and income tax

[ben richards]

Hi

I can see there are loads of useful replies to people's queries posted on these forums. In fact it looks like the most useful forum you could imagine for tax queries and suchlike. No wonder it is so popular.

I have a query which it would be great to get feedback about, if any adviser may be around (!). It is for the completion of my self-employed tax return. Among my work, I did several pieces of self-employed freelance work for companies in the last tax year (2009-10) where I did not do the invoice until the current tax year (2010-11). I have now been paid for them in the current tax year. I knew the invoicable amounts last tax year, just did not (due to things like illness of a family member), submit the invoices in the last tax year. Which ax year would the amounts go in, I wonder?

Also - and I guess this may be a separate point or the answer may be the same - in one the case of one other piece of work I put the invoice in at the end of the last tax year, but did not receive the payment for it until this tax year (2010-11). Again, does the income received for this bit of work go in the current tax year (2010-11) or in the last tax year.

Would be very glad if any expert has time to advise. It makes a difference as the answer could affect whether I am eligible for tax credits in the current tax year (as I project the overall income) or not.

Cheers in advance!
Ben

[RAL]

I knew the invoicable amounts last tax year, just did not (due to things like illness of a family member), submit the invoices in the last tax year. Which ax year would the amounts go in, I wonder?

Also - and I guess this may be a separate point or the answer may be the same - in one the case of one other piece of work I put the invoice in at the end of the last tax year, but did not receive the payment for it until this tax year (2010-11). Again, does the income received for this bit of work go in the current tax year (2010-11) or in the last tax year.

You need to calculate your profit using accrual methods. So even though you did not raise the invoice, the income should be included in previous tax year i.e. 2009/2010.

Same apply to invoice paid in the following tax year. This amount should go in previous tax year i.e. 2009/2010

[ben richards]

Thanks very much, RAL!

I assume this means that if for some reason I got an enquiry and they were looking at my income for the current year, with the amounts going in to my bank account that are accounted for in the previous year (2009-10), then I would just say, "these several amounts here are payments I took into account in last year's tax return" and that would be sufficient to account for them (unless they did an enquiry into last years tax return - for 09-10 - as well in which case I would just have have to duly provide more details, obviously, of all income on the return for 09-10).

BUT: incidentally, the HMRC helpline people told me to account for the money from the pieces of work I detailed in the opposite way to you, RAL - saying the money should go down in the tax year I received it in (not the year I did the work in which is what you've said). I happen to believe you're correct...not the HmrC helpline (!) - just goes to show how useful the helpline is (I've been misinformed by it before...)

Ben

[RAL]

If the work really carried out in last tax year than tax is payable last year. But you did not raise the invoice until this year. so you have to have some kind of proof that the work WERE CARRIED OUT LAST YEAR.

[ben richards]

Thanks. There is no issue of any kind with proving the pieces of work concerned were done in the last tax year (which was part of the reason I raised the query...). The invoicing just did not get done in the last (ie previous) tax year; due primarily to the major illness of a close family member. ...So I guess you are saying I might need to be able to prove this point if an aspect or other kind of enquiry came up for whatever reason. (My proof is the submission dates of the work, email records liaising about it, etc.)

Thanks for your responses...