We are moving from sole-traders position (after a year out of it) and starting afresh in 2021 with an LTD Company next year.
We used to run an events business and we have had an opportunity to take the event on the road in 2022 so will be running via an Ltd business which is not VAT registered as we will be under the threshold at the moment and will be for the foreseeable
My question is… We will start selling tickets for events in 2021 that actually fall in the next financial year.
Example: Aug 2021 - Selling tickets for Event in Feb 2022 (fine).
December 2021 - Selling tickets for Event in May 2022 (Next financial year).
We will of course be taking payments and logging them as usual for all Customers. However, if there anything I need to be made aware of? These are not deposits and are full payment.
I assume Year End will just be as normal? Just because the event people have paid for is in the next financial year this won’t make a difference?
If you are unsure of the vat treatment regarding services provided in the future and taking payment early I’d strongly advise you seek an accountant. Quickfile is an accounting software platform and any advice should be considered as opinions. Plus no one here are covered by any liability insurance should the advice be bad.
We have an accountant and I will ask her anyway but wanted to see what other people opinions were as it was fresh in my head late last night. Also, we are NOT and will not be VAT registered.
In that case, you’ll need to ask your accountant whether the advance payment is just that, or whether it is classed as turnover. It will most likely depend on how you have invoiced the client.
As a limited company you make up your accounts on an accruals basis, therefore matching income and expenses to the period in which they relate. If you are selling tickets for a specific one-off event which takes place in the following financial year, then the income is “deferred” until the next year, i.e. at the end of the year your accountant will move it out of sales and into the balance sheet where it shows as a liability called “deferred income”. This essentially reflects the fact that the event hasn’t taken place yet and if it was to fall through for some reason, you would be liable to pay those amounts back to the customers as refunds.
It would be different if the tickets were for an event which were to take place over a period of time.
In the same way, the costs are matched to the period in which the event takes place, by holding them in the balance sheet (either as prepayments or as work-in-progress depending on the type of costs/event and which is more appropriate) until the event takes place, at which point they are released to the P&L and included in turnover.