This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Accruals Basis Accounting and Timing of Quotes

solange
Posts: 61
Joined: Wed Aug 06, 2008 4:00 pm

Accruals Basis Accounting and Timing of Quotes

Postby solange » Fri May 24, 2019 8:45 am

Hi

Hoping someone can help.

I have buy to let properties and I am just doing my self assessment. I account using the accruals basis.

I have a property that needs a new kitchen but also ceiling repairs. I do have an inspection report from my letting agent, carried out in December 2018, stating the kitchen and the kitchen ceiling needed replacing and repairing.

I received a quote for the above before the year end 5 April, 2018. However it was only a quote for the kitchen replacement itself. The contractor had forgotten to quote for the ceiling repair.

I went back and asked the company to quote for ceiling repair. The company has taken a while to get back with the quote, and I have only received the amended quote that includes the ceiling repair now.

Therefore my question is, do I put the kitchen replacement quote figure only into 18/19 accounting period and the ceiling repair cost into 19/20 period, or should both costs go into 18/19?

Thanks in advance!

bd6759
Posts: 3090
Joined: Sat Feb 01, 2014 3:26 pm

Re: Accruals Basis Accounting and Timing of Quotes

Postby bd6759 » Sat May 25, 2019 12:40 pm

You can’t account for an expense until it is incurred.

bd6759
Posts: 3090
Joined: Sat Feb 01, 2014 3:26 pm

Re: Accruals Basis Accounting and Timing of Quotes

Postby bd6759 » Sat May 25, 2019 12:41 pm

Quotes go nowhere near your accounts.

solange
Posts: 61
Joined: Wed Aug 06, 2008 4:00 pm

Re: Accruals Basis Accounting and Timing of Quotes

Postby solange » Sun May 26, 2019 7:01 am

Thanks for your kind reply bd6795.

Can I not use the quote even if the work had started?

I account using the accruals basis ,and the quote is the only evidence I have as binding obligation,

Obviously there will be an invoice coming in the next few months.

solange
Posts: 61
Joined: Wed Aug 06, 2008 4:00 pm

Re: Accruals Basis Accounting and Timing of Quotes

Postby solange » Sun May 26, 2019 11:25 am

I have also based this using hmrc manual pim1011 and pim2040

When are expenses included in the profit and loss computation?
Expenses are also brought into the tax computation using normal accountancy principles and are the converse of the approach to receipts. This means that you deduct any allowable expenses (PIM1900 onwards) which relates to work done for the rental business, or goods and services supplied to the rental business, for a particular tax year to 5 April.

Provisions for repairs to premises
A customer can deduct expenditure on repairs where the liability to pay for the work is incurred during the tax year but payment has not been made by 5 April. But a provision for repairs to premises that they propose to incur in the future is not deductible. For example, they can’t claim a deduction for repair work they think will need doing next year but which they have not yet incurred any liability to pay.

solange
Posts: 61
Joined: Wed Aug 06, 2008 4:00 pm

Re: Accruals Basis Accounting and Timing of Quotes

Postby solange » Sun May 26, 2019 11:58 am

Sorry for yet another addition to my previous 2 posts, but I have also read that a quote would provide a legal obligation, providing I had accepted it, which I did, regardless of whether work had started or not.

bd6759
Posts: 3090
Joined: Sat Feb 01, 2014 3:26 pm

Re: Accruals Basis Accounting and Timing of Quotes

Postby bd6759 » Mon May 27, 2019 10:55 am

Your first post said that you had
only received the amended quote that includes the ceiling repair now
My response was based on that. Obviously, different facts will give a different answer.

Whether you have an obligation or not will depend on the terms of the contract with the builder.


Return to “Property Taxation”