when to bank my cheques

Strictly speaking your accounts should be kept on the accruals basis. That means earnings are recorded in the accounting year in which they were earned, irrespective of when (or indeed whether!) payment is received.

So you can hold them back, but it won't make any difference to your P&L account and hence tax position. You can't "roll them into next year" as earnings, only as a balance sheet asset (sundry debtors).

Ken

It makes no difference to your tax position.

Holding the cheques back should not make any difference as you have to bring them in as accrued income in any event. If you deliberately held them back and you did not account for them as accrued income then you are potentially being negligent (at best) or fraudulent (at worst) in not declaring all of your income for the accounting year.

AIUI it's the date on your invoice for the work done which in effect determines which tax-year the eaarned money falls into.... is that not right?

So if you did work for a client for all of February and March, but didn't send in the invoice till 6 April, then that would be the legit way to 'roll' such payments in to the following year?

David

I think that may be right for VAT purposes.

No, I think for IT/CT purposes the work done but not yet invoiced would need to be accrued as "work in progress".

Think about the implications. Say you had staff which did the actual work, and suppose you paid them on a weekly basis, and they were laid off for the whole year except Feb/Mar, and this was the only activity your company engaged in that tax year. Your accounts would then show a loss this year to the tune of your staff wages and expenses, while for next year, in which the company did no work at all, they would show a profit equal to the client's invoice.

It's in order to prevent this kind of distortion that accruals exist.

It would be a way that would probably work.

It isn't a legit way. It's an incorrect accounting practice that you could be penalised for if discovered (which it probably wouldn't be)

tim

No 'fraid not. Until the work is 'completed' it is work-in-progress which means that it goes into the balance sheet at cost (including overheads). However from the moment the work is complete it should go in at its selling price, viz the figure at which you will invoice to your customer (ex VAT). You therefore recognise the profit at completion of the work. However if it is 'long term' work-in-progress then you need to recognise profit as the contract progresses. The invoice date is only relevant for VAT purposes. However if you provide services rather than goods, then you now need to recognise profits as the contracted work proceeds. Not simple! If the amounts we are talking about are significant to your profits do not rely on HMRC not finding out about delaying the recognition of profits. You would be surprised how they can find out about things.

Not any more, read UITF 40.

You're supposed to bank cheques when you get them and not mess around.

There's nothing wrong with holding cheques. There is no logical reason why you should do it but there's nothing wrong so long as you reciognise them within current assets in your balance sheet.

Well I realise that, and that's why I put this in there: "However if you provide services rather than goods, then you now need to recognise profits as the contracted work proceeds."

I was trying to keep it simple as possible, but nothing is ever that simple! Please re-read my original posting. UITF 40 applies to the provision of services rather than material products.

In message , Peter Saxton writes

Where does it say that then?

Same place where is says dont put received cheques on a bonfire.

Someone did that with one of mine.

Saved me 15 pounds.

tim

In message , "tim (in sweden)" writes

Ah! That would be the bank's charge for bouncing it I assume! :-)