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If I return the payment this FY, are HMRC likely to insist that it was income?
This is another one for the tax returns thread, but if you receive the overpayment and then reimburse it in the same accounting period, the income is offset by the expenditure and netts to zero. If the transactions span the end of your accounting period, which year you allocate the transactions to depends on whether your tax return is compiled on a accrual or cash basis.
gbj_tester
@Leshaches
A client was late on paying my Feb. invoice, and when chased they paid it, then paid it again. Conveniently, my Mar. invoice was for the same amount, so I agreed with them to accept the payment and credit their account.
Now they’ve paid me the same amount yet again with a deposit reference for March . My Apr. invoice isn’t likely to be for the same amount.
I’m concerned that 40% of this mistaken payment would be tax liable. If I return the payment this FY, are HMRC likely to insist that it was income? My partner believes that the truthful explanation will suffice for HMRC, whereas my motto is to avoid doing good deeds that can appear to be bad deeds.