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Where Taxpayers and Advisers Meet

Advice for new ltd company

spiderladder
Posts:1
Joined:Fri May 03, 2019 1:05 pm
Advice for new ltd company

Postby spiderladder » Fri May 03, 2019 1:12 pm

Hi,

I am looking for some Tax advice. I wish to set up a Ltd company providing an entertainment hire service. I will have clients book services via myself for their event and have the option to pay off the fee monthly. Then I pay the supplied entertainer at the time of the event minus my commission - 10% for example.

How do I declare this on the tax return as for example the client may pay their entire balance in 2019 but the event may not be until 2021 when the entertainer would be paid for example. The money paid to the business by the client is not all profit - only 10%, with the rest going to the entertainer at the time of the event which may be a year later (or longer).

With weddings for example most people book a year or 2 in advance. My fear is I have to pay tax on all money received in the first year even though that money is not business profit, only 10% is profit but I still may have to pay tax on it. Then when it comes to paying the supplier/entertainer at the time of the event I am at a loss as I have had to pay tax on the full amount.

How would I record this income without having to pay tax on the 90% that will be paid out of the business again in the next tax year.

Please advise how this scenario would work
Thank you

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Advice for new ltd company

Postby pawncob » Mon May 06, 2019 9:56 pm

I suggest you ask an accountant to explain this to you, or even better, undertake the book-keeping for you.
With a pinch of salt take what I say, but don't exceed your RDA

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Advice for new ltd company

Postby AGoodman » Fri Jun 07, 2019 5:54 pm

It's called accrual accounting (as opposed to cash basis). You may not have paid the entertainer but you have the obligation to pay them so you set that against your profits.


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