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How to determine when business commenced?

Business partnership registration - determining correct date for commencement of business?

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Husband & wife wedding videography business registered as a business partnership with the date of business commencement being the date of the first wedding filmed. However, a substantial amount of deposit income was actually received in the previous tax year and a lot of it as much as a whole year before the start date. My question is - shouldn't the correct start date be when the business was in a position to trade? Ie office/editing studio established, advertising & marketing done, non refundable deposits for future work taken? If this is correct, is it possible to change the start date of the partnership with HMRC after it has been registered and what are the penalties for late registration & submission of tax returns?  Thanks in advance! 

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By johngroganjga
12th Nov 2019 18:31

Well they don’t make any profit until they film the first wedding, so I wouldn’t worry about the niceties of the commencement date until it makes a difference to something.

P.S. By the way, if they didn’t turn up to film a wedding they had been booked and paid for, would you still describe the deposits as non-refundable?

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Replying to johngroganjga:
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By whitevanman
12th Nov 2019 19:22

Really?
What date did trading commence? What are the AP's for tax purposes? How do they calculate taxable profits or indeed losses etc?
I rather think it is yet another example of failure to take professional advice at the correct time and possibly having created the (inevitable) problems.

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Replying to whitevanman:
By johngroganjga
12th Nov 2019 20:48

What problems have they created?

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Replying to johngroganjga:
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By whitevanman
12th Nov 2019 21:03

The ones that the OP has asked about.
They appear to have given incorrect information to HMRC and may (we have insufficient facts) have completed incorrect returns or failed to make returns. They may also have missed claims time limits (again depending on the facts). There may be others!

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Replying to whitevanman:
By johngroganjga
12th Nov 2019 21:41

What makes you think any incorrect returns may have been submitted?

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Replying to johngroganjga:
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By whitevanman
12th Nov 2019 22:21

Please read my post. I did not say they had.

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Replying to whitevanman:
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By Tax Dragon
13th Nov 2019 06:46

It appears as if John had read your post and you then didn't read his. IIRC, irony passes you by - but I hope you don't mind if I take a moment to enjoy it.

(I'd quickly add that, while some contributors have a habit of editing posts, I don't have John down as one of them - I respect and applaud him for that.)

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Replying to Tax Dragon:
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By whitevanman
13th Nov 2019 08:16

Having re-read John's post, in light of what you say, I realise I may have misunderstood him. He could be simply asking, in what way any returns (had they been made) may have been incorrect.
That being so, I apologise to John.
In answer to the question he may have asked, I would refer back to my first post, we dont have enough facts (even with the additional info from the OP).
We dont know if either partner was already within SA and had made returns for periods when the partnership was trading. We dont know when the trade may have commenced. OP now refers to 14/4/18 but where does that date come from? It certainly sounds like deposits may have been received earlier than that and it only needs to be 9 days earlier to fall in the previous tax year (for which returns were due 31 Jan 19 (generally).
Further, if the partners make it up for themselves in relation to the start of this business, what else might they be doing wrong?
Like Tooth, this type of thing could come back to bite them in the rear (see what I just did. Not limited to irony and available for birthdays etc).
Also, the business presumably employs various items of kit qualifying for Capital Allowances but when was the expenditure incurred? What is the time limit for claiming AIA etc? We wouldn't want them lying about the date of purchase, when they do make returns, just to get their allowances!
All of these are potential problems.

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Replying to whitevanman:
By johngroganjga
13th Nov 2019 08:32

We are told that 14 April 2018 is the date on which the partnership earned its first income. Deposits received before then were not income until earned by the delivery of the service they were payment for.

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Replying to johngroganjga:
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By whitevanman
13th Nov 2019 09:21

The date trading commences is the date the business opens and offers services to customers (there is a more accurate statement in one of the old tax cases - cannot remember which). Actually earning money isn't the issue. Also, 14 April is the date they filmed the first wedding. Advertising, agreeing contracts and taking deposits all happened earlier and from what the PP says, the actual start date could have been in 2017/18 - that's the first year he seems to want to file a return for on what we can only assume is the (proposed) cash basis.
More reasons why proper, professional, advice is needed.

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Replying to johngroganjga:
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By finbee78
12th Nov 2019 22:39

No returns have been submitted yet. These will be the partnership's first tax returns. So far I have only registered the partnership with HMRC with start date 14/4/18 being the date first wedding was filmed. Was going to include all deposit income received before start date in first tax return 2018/19 as if received on first day of tax period (accountant advised that this would be acceptable as all income has been disclosed in first return to be considered for tax charge). But now wondering whether can correct start date with HMRC to be earlier when non-refundable deposits were actually received and prepare & submit tax return 2017/18 as first tax return instead. I realise if its possible to change business commencement date with HMRC, there would be penalties to pay (for late registration and submission of tax returns) but not sure how much the penalties would amount to?

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Replying to finbee78:
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By Tax Dragon
13th Nov 2019 07:01

finbee78 wrote:

accountant advised that this would be acceptable as all income has been disclosed in first return to be considered for tax charge

But, as you say, you appear to have started trading long before, so why is this the first return to be considered?

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Replying to johngroganjga:
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By finbee78
12th Nov 2019 22:23

Thank you for your reply and explanation. However, this partnership is accounting on a cash basis. Does that not mean that deposits are recognised when they are received rather than when they are actually earned? Some deposits received in 2019 are for weddings in 2021.

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Replying to finbee78:
Hallerud at Easter
By DJKL
12th Nov 2019 23:52

Given the thought that there will likely be continuous deposits with this sort of business the big question to be asked is why one would want to account on the cash basis and accelerate income recognition? It might be the best way to go re using personal allowances but it may well not be, is this a conscious choice or mere capricious choice?

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Replying to finbee78:
RLI
By lionofludesch
13th Nov 2019 10:51

finbee78 wrote:

Thank you for your reply and explanation. However, this partnership is accounting on a cash basis.

Oh no !!!

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Replying to finbee78:
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By JoF
13th Nov 2019 11:20

I really think you should stop trying to avoid any fines and make sure you get this right now rather than making more mistakes to compound issues.

You are clearly out of your depth. Bite the bullet and get an Accountant. Be worth it in the long (and probably short) run.

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Replying to finbee78:
By johngroganjga
13th Nov 2019 11:46

Yes it might mean that, but you would be mad to accelerate your tax liabilities by adopting the cash basis of accounting. Who advised you to adopt that basis, and what advantage did they say you would obtain from doing so?

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Replying to johngroganjga:
RLI
By lionofludesch
13th Nov 2019 11:53

johngroganjga wrote:
Who advised you to adopt that basis, and what advantage did they say you would obtain from doing so?

My guess ? HMRC.

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By Accountant A
12th Nov 2019 18:49

You should have appointed an accountant before you made the first bookings etc. Don't compound the problem by not appointing one now.

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By JDBENJAMIN
12th Nov 2019 23:12

If you've got an accountant, ask him. If not, appoint one and ask him.

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