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How to correct use of home expenditure

Historic use of home expenditure was estimated and client would like to correct to use actual.

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I have a new limited company client and in reviewing the prior three years accounts, they all look pretty normal except the Use of Home journal which looks suspiciously round at £1,250 for each of the previous years. It obvious the previous accountant just estimated the figure. In discussions with the client, the figure should be closer to £700 - £800 for each year. 

The DLA is a credit balance i.e. the company owes the director and changing the amount will not affect his personal tax over this period but will obviously affect the corp tax. 

Would you just post a correcting journal for all three years which would be approx £1,500, in the current year or would you contact HMRC re the prior years? I am just conscious of the reduction in corp tax (1% yay!!) as there would be a benefit of approx £15 to the taxpayer of doing it this year. 

It is a lot of work for the client to get historic bills etc and do the calcs but he is keen to get it right. 



Replies (5)

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By atleastisoundknowledgable...
04th Jul 2018 09:56

I’d just make the adjustments this year, but not CR HaO, maybe CR sundries. Don’t want the accounts to look too silly.

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By andy.partridge
04th Jul 2018 14:41

Either you are over-thinking this or you have too much time on your hands.

Are you sure there is/was no rent agreement in place? Are you content with the different treatment in this area of ltd co v sole trader?

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By Tim Vane
04th Jul 2018 12:48

I would let sleeping dogs lie.

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By meadowsaw227
04th Jul 2018 13:07

Would not the declaring of the income received from the Limited Company on his SA tax return have cleared this up.

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By Tax Dragon
04th Jul 2018 14:10

Hopefully you understand from the above replies that

exceljockey wrote:

changing the amount will not affect his personal tax over this period

may need further reflection.
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