Payment received early

[*qwerty*]

I have a job which is due to take place in tax year 2013-2014 but the customer has paid early. I pay contractors to do the work, but they invoice after the work has taken place. Would the payment received go towards this years accounts and the payment to the contractors in next years account or could I put it all through for next year?

 

[SBlundell]

If you have received the money in advance of any entitlement to it you should 'defer' the income into next year.

So yes, the income goes in next tax year.

Similarly, you should account for the cost when it's due not when it's paid. So if you paid your contractors in advance, you would also defer this cost until next year too. In your case it doesn't matter as the costs will be picked up in next year anyway (correctly matched with the income, above).

 

[*qwerty*]

Fantastic, thanks for your help Sam.