Can anyone advise on the following.
Company's business relates to issuing licences and carrying out compliance inspections.
Company receives licence fee immediately but incurs compliance expenditure up to 18 months after initial licence sale.
Company has sought to defer a proportion of income relating to compliance inspection to a later accounting period when the cost is
incurred.
What is CT implication.
Thanks SD
sass ezekiel
Replies (2)
Please login or register to join the discussion.
direct tax
John,
Generally the licence fee is not refundable, it is only refunded if the licencing process is discontinued by the buyer.
The income relating to the compliance testing is being treated as deferred income, not WIP.
Thanks
Sass
Licence Fees
sass
Are these licence fee spaid in advance refundable to the client? If so, could you not treat them as Deposits and have them recorded as such in the Balance Sheet.
If they are non-refundable, then you could treat as W-I-P, I should think, if the expenditure relating to them has not been incurred at year end.