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Incidental rental income

in limited company accounts.

I have a new client which operates as a property developer.  The properties held for development are treated as stock.  The client sometimes receives rental income on some properties and hitherto such rental income has been treated as incidental income on each project and has been included in turnover on the P&L rather than other operating income.  On the CT600 the rental income is just included in the overall trading profit or loss, which is obviously incorrect but in actual fact hasn't made any difference to the tax charge.

I think that the correct accounting treatment in the P&L ought to be as other operating income, buit my brain is so frazzled from four hours spent trying to get the company and the comparatives figures set up correctly in IRIS iXBRL that I am having difficulty thinking straight!

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11th Jul 2012 14:50

What is the question?

"Incidental" does not make it any the less "Rental income", just as "Casual" labour does not make it any the less "Wages".  Rental income should be coded to Rents received (code 89 in IRIS AP) and it will then be reported under Other Operating Income (the iXBRL tagging is automatic) and will appear correctly on the CT600.  To get the accounts straight, you should re-post last year as well.

How on earth you can spend 4 hours setting up the iXBRL in IRIS is a mystery.

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By nutwood
12th Jul 2012 08:05

No real question - obviously.

Thanks, Euan.

I think the practice started because a few years ago they had bought industrial premises for conversion to small commercial units which included some advertising hoardings.  They received a few hundred pounds of rent for a short period before they sold the strip of land to the hoarding company and reasoned that the costs of dealing with the rental, including legal fees, were indistinguishable from the costs of the sale, they would just lump it all together in the accounts.  That was a one-off for a while but as the residential property market slowed thay have let several properties which proved hard to sell on a short term basis and carried on dealing with the rental income in the same manner in their management accounts and that's how they expected they would appear in the statutory accounts.

re PTP (IRIS) Accounts production, I don't know what it is about the system but seems to me that it often works in a way which is just not intuitive and unlike other PTP products or any bookkeeping package I have used.  I have used PTP tax products for more than ten years and have only had to resort to the helpline a handful of times.  This client is the most complex one I have set up on the system so far and I rigourously followed the 'tutorial' in setting it up and stilll found problems mostly as a result of things the tutorial doesn't bother to mention.

Hopefully it will get easier as I put more clients on it.

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