I have an invoice for £595 raised on the 4th April 2016 which has not yet been paid. So when I go to file my Tax Return with HMRC in a while does this count as income for 2015-16 year or for 2016-2017? In the Profit & Loss report it increases the General Sales by £595 but as I haven’t yet been paid is it actually taxable? Also, when I do get paid it will shows as income for the new financial year.
Hi @jeremygadd
QuickFile works on an accrual accounting set up, so all income and expenses are recorded when they happen (e.g. the invoice date) rather than when they are paid.
So, in your example, the £595.00 will be included in 2015/16 and not in the 2016/17 tax year.
Hope that helps?
@QFMathew. Yes, I see what you mean, but if I then do my return and include that £595 what happens when I do next year’s return and I Tag this payment of £595 is in my Current Account on QF? That to me sounds like I am going to be taxed on that amount in both financial years. Logically, I know that this is not the case, otherwise QF would be a flawed product that is costing small businesses thousands in taxes! 
So, can you please explain what happens to this £595. Thanks
With accrual accounting, the £595.00 will appear on your profit and loss for the tax year in which the invoice was dated - in your case, 2015/16.
And that’s it. It won’t appear on any other profit & loss. It will however appear on your balance sheet for 2015/16 as outstanding (not paid), but this will disappear as soon as it’s been paid.
If you’re a sole trader or partnership with turnover under a certain threshold then you can choose. If you use the “cash basis” for your tax return you’ll be taxed in the year when the money is paid, if you don’t then it’s the invoice date. All the standard profit and loss reporting in QuickFile is based on invoice dates so if you are doing your own returns then that’s probably the simplest way to go, but if you have an accountant then they’ll be able to advise better.
@ian_roberts - is accrual accounting the same as what HMRC call ‘traditional accounting’ ?? It would be easier to just run my accounts with QF and then use the corresponding method for filling my return.
Yes, they’re two names for the same thing as “traditionally” you do accounts based on accrued (i.e. invoiced) income and expenses rather than cash paid.