No further VAT is to be charged on the debtors, but they are passed to the new owner inclusive of VAT.
VAT has already been declared ....., so if it's charged it'll be a double charge.
The new owner of the debts will offset the Gross receipts against the Gross cost of the debtors in the ledger.
I agree. 100%.
The SELLER accounts for the output vat on sales up the date he ceases trading. If he uses cash accounting, he needs to include any unpaid sales invoices (debtors) on his final vat return
The PURCHASER buys the right to receive the income from the seller's debtors at the date he purchases the debtors. The PURCHASER shows a debit opening balance on the debtors control account which is settled by subsequent receipts.
The purchaser has not sold anything. You cannot account for output vat if there has been no sale.
Hi all, I have today had this back from DWP - so we have confirmation that there will be two cash accounting systems with which the self-employed must comply.....
".....Thank you for your email. Please accept my apologies for the delay in getting back to you about your enquiry about Universal Credit and the self-employed.
I can confirm that we have designed a simple cash basis accounting system for the self-employed in Universal Credit, closely aligned with that being introduced by HMRC. This will allow self-employed claimants to quickly and accurately report their earnings each month.
We are still considering which products and guidance will be most useful to help self-employed claimants understand the claim process and income reporting requirements, and will seek the views of stakeholders where possible.
Kind regards,
.........Universal Credit Policy Communications and Stakeholders Team"
I can't find anything on the DWP website. I have emailed them to ask for content on this topic.
I'll post a link if they supply any new information.
Who knows... maybe they are just going to carry on the status quo and brush all this proposed monthly reporting under the carpet - pretend it was never mentioned.
LITRG (in July 2012) said it was proposed there would be 2 sets of accounts - one for DWP and another annually for HMRC, each under different rules. See: http://www.litrg.org.uk/News/2012/self-emp-uc.
That seems very likely to me.
It would suggest HMRC are not getting involved with RTI-reporting for the self-employed which would explain why we are not getting any news.
How many clients know that loan repayments are not the same as loan interest?
How many will have reconciled their figures to their bank statements?
Have they got a full set of bank statements?
Have you ever had a single cash book that didn't need correcting?
Where would you stand on AML if you hadn't looked at the records?
It seems to me every accountant has their own threshold on what is acceptable. Many will accept a summary sheet of figures as being "the books and records provided". But there is a huge range of opinion. If you feel a client is pushing you to do something you are not comfortable with you should not take the work.
If your client is panicking because they will not make the Jan deadline then take control. Point out that the fine is only £100 and that they may very well pay decidedly more than that if there is an enquiry and the figures prove to be inaccurate. Take them through the current penalty regime. I bet they don't know the consequences of getting it wrong. Tell them you can do the work for them properly in Feb. In the interim tell them to make sure they have a full set of bank statements & loan statements ready for you - hard copy and on Excel too if this is possible.
If they try to push you by saying that they know other accountants will accept what they are providing, and you are not of a similar mind then you have to be prepared to be tough and maybe lose the client.
october deadline foor self-employed UC s-emp claimant
One of my clients' sons has just started a new self-employment and is claiming state benefit to support him in the early months of the business. He has been told by the DWP Benefit Office he will need all his books fully up to date by October
I think people are failing to see that RTI means real time information - and it is required to so that people claiming benefits are paid the correct benefit, whatever their employment status.
HMRC have been very good at providing speakers for lectures on how RTI will affect payrolls. I strongly feel they are entirely letting us down by not including in these lectures any guidance on where they are up to with how the self-employed will report under RTI.
Points against the original idea, as per above are that:
- people can report lower hours than they actually do.
- Checking actual hours will be impossible to police - you would need to appoint a person to track each self-employed person's vans or monitor shop opening hours...Spies? What if you closed early because there was no business that day? No self-employed person works the exact same hours every week. Even if this was sane it would not be cost effective for HMRC/ DWP to police.
- using (NMW x hours worked) does not allow for people making business losses.
- Any businesses requiring any significant investment or development phase would automatically be excluded from sole-trader or partnership status, if the entrepreneur needed to claim universal credits to keep body & soul together during start up. So no inventors allowed under the new system then!?
The question is, is this still the only plan ? We are getting awfully close to October 2013. What body is dealing with this? HMRC or DWP? Are they producing filing software? Is the reason that everything seems to have gone quiet because HMRC have gone back to the drawing board? There was a condoc wasn't there? About optional cash accounting - which was supposed to help self-employed to report under RTI. I remember Rebecca Bennyworth asked us all for input on cash accounting some months ago. Perhaps the condoc feedback is still being considered?
I have to say, I don't mind that they are behind with it, I just want to know where they are up to so I can make sure my clients are ready. Has anyone checked the LITRG website?
In my opinion, and subject to your own research, if vans are 100% business, normal procedure would be:
- add back depreciation
- add back accounting loss on sale
- add back other disallowable expenses
- come to taxable profit before capital allowances.
Then, in the capital allowances computation:
- business element (100%?) of cost of vans would get Annual Investment Allowance with any excess possibly getting FYA as it is plant
- remainder £0 entered in main pool
- disposal proceeds would be entered in the main pool and reduce the balance of the pool BEFORE this year's WDA is calculated.
Normally, in the first year, the trader will have assets introduced into the business which are not eligible for AIA and show as "additions with no allowances". If these are main pool items, your van sale proceeds will be netted off against them. Any remaining positive balance would be eligible for 20% WDA or small pool write off.
However, if you are left with a negative value on the main pool, I think a balancing charge must arise. I'd have to check. I don't think you can allow a negative balance on the main pool to be carried forward.
If the vans were part private, then then they would each have their own pool - so a bit different.
As I recall, it makes a difference (1) who the bill is addressed to and (2) who pays the supplier.
My understanding is that if the director pays the supplier and the bill is privately in his name and then the company reimburses him for out of pocket expense then this goes on the P11D.
My answers
Did you find an answer to this? I have the same Q
treatment of debtors in the purchaser's books
I agree. 100%.
The SELLER accounts for the output vat on sales up the date he ceases trading. If he uses cash accounting, he needs to include any unpaid sales invoices (debtors) on his final vat return
The PURCHASER buys the right to receive the income from the seller's debtors at the date he purchases the debtors. The PURCHASER shows a debit opening balance on the debtors control account which is settled by subsequent receipts.
The purchaser has not sold anything. You cannot account for output vat if there has been no sale.
official response from Universal Credit
Hi all, I have today had this back from DWP - so we have confirmation that there will be two cash accounting systems with which the self-employed must comply.....
".....Thank you for your email. Please accept my apologies for the delay in getting back to you about your enquiry about Universal Credit and the self-employed.
I can confirm that we have designed a simple cash basis accounting system for the self-employed in Universal Credit, closely aligned with that being introduced by HMRC. This will allow self-employed claimants to quickly and accurately report their earnings each month.
We are still considering which products and guidance will be most useful to help self-employed claimants understand the claim process and income reporting requirements, and will seek the views of stakeholders where possible.
Kind regards,
.........Universal Credit Policy Communications and Stakeholders Team"
DWP website
I can't find anything on the DWP website. I have emailed them to ask for content on this topic.
I'll post a link if they supply any new information.
Who knows... maybe they are just going to carry on the status quo and brush all this proposed monthly reporting under the carpet - pretend it was never mentioned.
low income tax reform group
LITRG (in July 2012) said it was proposed there would be 2 sets of accounts - one for DWP and another annually for HMRC, each under different rules. See: http://www.litrg.org.uk/News/2012/self-emp-uc.
That seems very likely to me.
It would suggest HMRC are not getting involved with RTI-reporting for the self-employed which would explain why we are not getting any news.
accruals? reconciliations? loan repayments & interest?
How many clients know that loan repayments are not the same as loan interest?
How many will have reconciled their figures to their bank statements?
Have they got a full set of bank statements?
Have you ever had a single cash book that didn't need correcting?
Where would you stand on AML if you hadn't looked at the records?
It seems to me every accountant has their own threshold on what is acceptable. Many will accept a summary sheet of figures as being "the books and records provided". But there is a huge range of opinion. If you feel a client is pushing you to do something you are not comfortable with you should not take the work.
If your client is panicking because they will not make the Jan deadline then take control. Point out that the fine is only £100 and that they may very well pay decidedly more than that if there is an enquiry and the figures prove to be inaccurate. Take them through the current penalty regime. I bet they don't know the consequences of getting it wrong. Tell them you can do the work for them properly in Feb. In the interim tell them to make sure they have a full set of bank statements & loan statements ready for you - hard copy and on Excel too if this is possible.
If they try to push you by saying that they know other accountants will accept what they are providing, and you are not of a similar mind then you have to be prepared to be tough and maybe lose the client.
october deadline foor self-employed UC s-emp claimant
One of my clients' sons has just started a new self-employment and is claiming state benefit to support him in the early months of the business. He has been told by the DWP Benefit Office he will need all his books fully up to date by October
I think people are failing to see that RTI means real time information - and it is required to so that people claiming benefits are paid the correct benefit, whatever their employment status.
HMRC have been very good at providing speakers for lectures on how RTI will affect payrolls. I strongly feel they are entirely letting us down by not including in these lectures any guidance on where they are up to with how the self-employed will report under RTI.
Points against the original idea, as per above are that:
- people can report lower hours than they actually do.
- Checking actual hours will be impossible to police - you would need to appoint a person to track each self-employed person's vans or monitor shop opening hours...Spies? What if you closed early because there was no business that day? No self-employed person works the exact same hours every week. Even if this was sane it would not be cost effective for HMRC/ DWP to police.
- using (NMW x hours worked) does not allow for people making business losses.
- Any businesses requiring any significant investment or development phase would automatically be excluded from sole-trader or partnership status, if the entrepreneur needed to claim universal credits to keep body & soul together during start up. So no inventors allowed under the new system then!?
The question is, is this still the only plan ? We are getting awfully close to October 2013. What body is dealing with this? HMRC or DWP? Are they producing filing software? Is the reason that everything seems to have gone quiet because HMRC have gone back to the drawing board? There was a condoc wasn't there? About optional cash accounting - which was supposed to help self-employed to report under RTI. I remember Rebecca Bennyworth asked us all for input on cash accounting some months ago. Perhaps the condoc feedback is still being considered?
I have to say, I don't mind that they are behind with it, I just want to know where they are up to so I can make sure my clients are ready. Has anyone checked the LITRG website?
neg bal
When (- disposal proceeds) exceed (+WDV bfwd + additions without allowances)
This trader has no WDV b/fwd and probably small additions without allowances, whereas he has significant proceeds on disposal.
loss on sale
In my opinion, and subject to your own research, if vans are 100% business, normal procedure would be:
- add back depreciation
- add back accounting loss on sale
- add back other disallowable expenses
- come to taxable profit before capital allowances.
Then, in the capital allowances computation:
- business element (100%?) of cost of vans would get Annual Investment Allowance with any excess possibly getting FYA as it is plant
- remainder £0 entered in main pool
- disposal proceeds would be entered in the main pool and reduce the balance of the pool BEFORE this year's WDA is calculated.
Normally, in the first year, the trader will have assets introduced into the business which are not eligible for AIA and show as "additions with no allowances". If these are main pool items, your van sale proceeds will be netted off against them. Any remaining positive balance would be eligible for 20% WDA or small pool write off.
However, if you are left with a negative value on the main pool, I think a balancing charge must arise. I'd have to check. I don't think you can allow a negative balance on the main pool to be carried forward.
If the vans were part private, then then they would each have their own pool - so a bit different.
payment of director's phone bills
As I recall, it makes a difference (1) who the bill is addressed to and (2) who pays the supplier.
My understanding is that if the director pays the supplier and the bill is privately in his name and then the company reimburses him for out of pocket expense then this goes on the P11D.