Entries (RSS)Reduce your tax liability by accruing relevant expenses
For tax purposes all income and expenditure must be on accruals basis. This means that it is irrelevant when you are invoiced or when you pay for an expense. What is relevant to the taxman is when the income or expenditure arises.
So for example, let’s assume you have repair work done to your property on 29th March 2009 but you don’t get invoice until 10th April. Even though you didn’t receive the invoice or pay for it until the following tax year, the expense needs to go into your tax return for the period to 5th April 2009. The rule is you need to include the expense in the return for the year in which the expenditure was incurred- not the year in which it is paid.
The same rule applies for income. So rents which are due for the year but are not received until the following year must also be included as income for the relevant tax year.
You must therefore look carefully at all income and expenses paid and received in the period following the tax year to see if any items need to be accrued for the previous tax year.
If you want more advice on tax please see http://www.marywaring.co.uk/propertytaxsecrets.html
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