Content
U-Turns Galore
Premises, Promises
Filing Bonus
RIP: 0% Rate
His and Hers
Party Spirit
State Of The Union
VAT's The Point?
Going Dutch
Away Win For Revenue
WIP-Round
The Best Land Plans
Tax Free Gizmos
Where Theres A Will
Do You Work Here?
Out Of The Shadows
Sacrifice Works
Home Sweet Office
Sauce For The Goose
Blissful Ignorance
PC Or Not PC?
Lost On Penalties
Worth The Paper
Carry The Can
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There has been a lot of discussion in professional services businesses about UITF 40 - a new accounting rule that requires the value of work-in-progress to be brought into sales and profits as the job goes along, rather than when it's finished. Accounting rules aren't usually a hot topic for business people, but if you have to put the sales in the P&L sooner, you have to pay tax on them sooner - even if the customers pay you at the same time they always have (usually a lot later). Solicitors and architects and - well, accountants - have been worried that the new rule would create a big one-off cash hit on the changeover. It could affect anyone who supplies services where substantial jobs are unfinished at the accounting year-end. Traditionally, the profit on these jobs has only appeared in the profit and loss account when the job was billed, which might be as progress payments but would often be on completion. Now, the turnover for each year is supposed to reflect the amount of work done in each year, so the WIP is supposed to go into sales - at selling price, not at cost, and that brings in the profit. After ignoring the issue for a long time, the Chancellor finally responded in the Pre-Budget Report by announcing new rules to allow "spreading" of the increased income. That's not the best possible news (that the new rule could be ignored for tax) but it's better than nothing. It means that the increase in profits that comes from first bringing WIP in as sales can be taxed over three years or, in some situations, up to six years, instead of all in the first year. If you think you might be affected by this, we will be happy to discuss the rules with you. |
© Bayar Hughes & Co., 2010.