Treatment of deferment duty in the correct accounting period

Treatment of deferment duty in the correct...

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I would be grateful for any advice on this question. We hold a deferment duty account with HMRC which we pay on the 15th every month. HMRC send us a notice telling us what they are going to take by DD around the 7th each month. By this point we have closed the ledgers and prepared the management accounts. Therefore we account for deferment duty due in the following month when it actually relates to the previous month. Is this incorrect as obviously the 'matching concept' states that you must match costs to sales in the same period. But at the time we prepare the accounts we are unaware of the exact value of the deferment duty due. Thanks. Kate

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By johngroganjga
22nd Apr 2014 12:03

What does your accountant say?

Your accountant should have explained that all you need to do is estimate the liability to the best of your knowledge - much as you must already do for other supplies for which you are invoiced in arrears, such as electricity charges.

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By kateraddings
23rd Apr 2014 09:23

Thank you for your answer, I receive a statement each month from HMRC for deferment, an element of this is duty and an element of this is VAT. Is your answer also true for the VAT element as I was under the impression you can't accrue for VAT.

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By johngroganjga
23rd Apr 2014 09:42

No - recoverable VAT is not an expense, so you can't accrue for it.

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