Invoice date

[neilsolaris]

Good morning,

Can I check my understanding regarding invoice dates is correct please?

I do the bookkeeping for a company (which is VAT registered, if that's at all relevant), and part of my job is to prepare sales invoices, and email them to the director, who then emails then to the customer.

Sometimes he asks me to prepare them in advance of the engagement date, but I have always dated them with "today's" date, with the expectation that he's going to email it to the client straight away (and it turns out he does).

However, he's asked me from now on if invoices prepared in advance can have the same invoice date as the engagement date, even though the customer might receive it a week before.

Would I be correct in assuming that dating invoices in advance with either the actual date or with a future date is absolutely fine? But obviously I'll post date the invoices as requested.

Thanks for any clarification.

 

[Ozzy]

I do the bookkeeping for a company (which is VAT registered, if that's at all relevant)

This is relevant because it effects the quarter that the VAT liability is accounting in. So long as your consistent in whatever you do thought it should all balance fine.

Would I be correct in assuming that dating invoices in advance with either the actual date or with a future date is absolutely fine? But obviously I'll post date the invoices as requested.

Sorry "post" is a very specific term when it comes to accounting, so can you clarify exactly what you mean by this part above. Are you posting them out to the client on the day requested, or posting the entry on the date requested whatever date you are being asked to do?

 

[neilsolaris]

Thanks for your clarification.

I understand consistency is important in accounting, but I'd welcome any confirmation from others regarding the necessity of dating all future engagements according to the same rule.

Post-dating just means assigning a date later than the actual one.

 

[NicoJ]

https://www.gov.uk/vat-record-keeping/time-of-supply-or-tax-point

As long as the invoice is issued before the supply (and the customer hasn't paid) you should be fine.

 

[neilsolaris]

Thanks Nico. That's what I suspected.

 

[Argentum Tax]

Would I be correct in assuming that dating invoices in advance with either the actual date or with a future date is absolutely fine?

Technically, I suspect the invoice date should be the date you actually issue the invoice. However so long as there is nothing intentionally fraudulent in the dating I don't see that anyone would take issue.

For VAT purposes however the 'time of supply or Tax Point' is more important. In this respect I would suggest you follow the HMRC official guidance on the following link:

https://www.gov.uk/vat-record-keeping/time-of-supply-or-tax-point

I hope that helps.

 

[neilsolaris]

Thanks Argentum. I agree with you, I think it is more logical to put "today's" date on an invoice.

By putting a future date on, it's like saying "here's the invoice, but it's not valid yet, so just ignore it for now". It seems the same situation to me as giving someone a post-dated cheque! It seems to me, post-dating an invoice to the date of supply is for all intents and purposes the same as issuing it on the day of supply.

I use that government link to help remind me the tax point. I'm not sure it specifically answers my question, but it does recognize invoices issued in advance of supply (obviously dated with the issue date).

 

[NicoJ]

You've had the tax point link twice so I'm sure you're comfortable with that.

I think it comes down to the reason itself. You mention an engagement date, perhaps this means that any invoice prior to that date is invalid as the customer has not agreed the terms of the project? If that is the case then it would seem that the invoice is a quote or a proforma rather than an invoice. Perhaps your director could email the quote immediately and then the invoice when the job starts?

 

[neilsolaris]

Thanks again Nico.

Yes, I'm comfortable with the link thanks. Its the one I have been referring to for a few years now.

The customer has definitely agreed to the terms. I don't know why the director wants to send it out early, but I think it's just a case of him wanting to be efficient and ahead of the game.

 

[WaveJumper]

Have we actually asked the director why he does this he may have a perfectly logical answer and as a director maybe privy to things your not

 

[neilsolaris]

I haven't asked him specifically. It's only to one customer he sends it out early to, and he knows this person very well. I'm sure the reason I gave in the previous post is the answer he'll give me if I ask him, but I could bring it up with him when I next see him. Also, on this occasion, he has some family matters to attend to, so perhaps he doesn't want to forgot to send it later if he's preoccupied.

The reason I posted here initially, is because the director believed that the correct procedure when issuing invoices in advance is to date it with the engagement date. But from the responses here, it seems that you all see this as unorthodox, like I did. I think the default position is to enter the date the invoice was issued. But if he wants me to post-date the invoice, I'm happy to, and nobody has warned me against it. If it got investigated I can't imagine it looking suspicious, because I doubt they'd know what date the customer actually received it.

I should add, the customer never pays before the engagement date.

 

[WaveJumper]

If it’s just this one specific customer clearly there’s a reason behind it, be interesting to hear what it is when you find out

 

[neilsolaris]

I'll let you know when I find out (whilst being discreet of course!).

 

[WaveJumper]

I'll let you know when I find out (whilst being discreet of course!).

Of course

 

[neilsolaris]

I don't want to necessarily start a new thread, but I have a related question I'd be grateful if someone can help with please.

I understand how to work out the tax date of an invoice for VAT purposes. However, are there hard and fast rules for determining when to record the non-VAT part of the invoice, or for invoices not involving VAT?

For instance, one of our suppliers did some work for us just before the end of their financial year, and they waited until the beginning of the next financial year before invoicing us, so that they could declare that income in a later year, in order to save tax. I told him if he did this, he should be a little vague on the invoice about when he carried out the work, because technically it should be recorded in the period when he carried out the service.

I'm starting to doubt myself now, and I can't find anything definitive online. Was I correct in saying the above, or should the transaction simply be recorded according to the date on the invoice?

Many thanks.

 

[Newchodge]

I invoice my clients when I feel it is apporpriate, some I invoice in advance of supply, and the invoice is dated on the date I send it. For different types of supply I invoice in arrears, when I have competed either all or a certain proportion of the supply. I cannot see that there is anything wrong invoicing with a date after the supply has completed, as long as it is within 15 days of completion.

 

[neilsolaris]

Thanks Cyndy. But for services carried out just before your financial year end, would you record an "invoice in arrears" in the next financial year?

I just read somewhere that if it has a material effect on the statements then record it on the date the service occurred, otherwise the invoice date is fine.

 

[Newchodge]

Thanks Cyndy. But for services carried out just before your financial year end, would you record an "invoice in arrears" in the next financial year?

I just read somewhere that if it has a material effect on the statements then record it on the date the service occurred, otherwise the invoice date is fine.

Yes, if the supply finished 10 days before the financial year end, I might well invoice 4 days into the new financial year.

 

[NicoJ]

With accruals accounting you would adjust for this so would bring it into your year anyway. Cash accounting would be when the customer paid, but all of the materials would be in the prior year so you may lose some of your reliefs if this takes you down below your PA or into a loss.

People think they're being clever when it's all been thought of before.

 

[Argentum Tax]

With accruals accounting you would adjust for this so would bring it into your year anyway.

Agreed NicoJ. However for a limited company accruals accounting must be used. This will reduce or wipe out any advantage or disadvantage in computing the company's profits because of the date on any invoice.

 

[neilsolaris]

Thanks for your replies.

To make sure I understand correctly NicoJ, is this what you're saying....

Let's say your financial y/e is 5th April 2021. You issue an invoice for £1000 dated 10th April for services completed 31st March.

So you record the invoice dated 10th April. Then you credit sales for y/e 2021 £1000, debit accruals £1000. And you then debit sales for y/e 2022 £1000, credit accruals £1000?

Thanks.

 

[Scalloway]

So you record the invoice dated 10th April. Then you credit sales for y/e 2021 £1000, debit accruals £1000. And you then debit sales for y/e 2022 £1000, credit accruals £1000?

Yes

 

[neilsolaris]

Thanks Scalloway.

 

[NicoJ]

Agreed NicoJ. However for a limited company accruals accounting must be used. This will reduce or wipe out any advantage or disadvantage in computing the company's profits because of the date on any invoice.

We are not told the entity of the supplier hence my post including both options.

 

[neilsolaris]

He does accruals accounting, I should have mentioned it!

 

[NicoJ]

Thanks for your replies.

To make sure I understand correctly NicoJ, is this what you're saying....

Let's say your financial y/e is 5th April 2021. You issue an invoice for £1000 dated 10th April for services completed 31st March.

So you record the invoice dated 10th April. Then you credit sales for y/e 2021 £1000, debit accruals £1000. And you then debit sales for y/e 2022 £1000, credit accruals £1000?

Thanks.

I know Scalloway has already answered but yes that is what is supposed to happen. It could be that he is trying to avoid the VAT threshold by deferring his sales or he could be trying to save tax. I'd like to say that HMRC will catch up with him if he is being dodgy but I wouldn't bet on it.

 

[neilsolaris]

I know Scalloway has already answered but yes that is what is supposed to happen. It could be that he is trying to avoid the VAT threshold by deferring his sales or he could be trying to save tax. I'd like to say that HMRC will catch up with him if he is being dodgy but I wouldn't bet on it.

Well, he's not VAT registered, but he was trying to avoid a bit of tax. It would only have been about £60 worth of tax to put it in context. That's why I said he should either put it in the previous accounting year, or word the invoice so that anyone investigating wouldn't have a clue to which period it belonged. I wasn't advocating him to break to law by the way!

 

[Argentum Tax]

We are not told the entity of the supplier hence my post including both options.

Yes, NicoJ, I understand that. However you didn’t make clear that limited companies do not have a choice; they must use the accruals method. That’s all I was saying.