Thursday, 13 July 2017

Definition of income / turnover

I looked up "income" in a dictionary and got two definitions.
  • money that is earned from doing work or received from investments
  • a company's profit in a particular period of time
Neither of these meet the Office of National Statistics definition. They apparently want some stats from us, as they do occasionally, and this time it was our "income for June", or "turnover for June"...

Now, I, and Alex, actually assumed that would be VAT exclusive invoiced total for invoices in June. Or possible adjusted for the invoice period for services, e.g. if an invoice was for June+July, we would only total the June part. Both of these are figures we have available from our accounts without too much bother.

It is interesting that the dictionary (it was just one I looked at) says for a company it would be profit which is different yet again. But they did say "turnover" as well as "income" pretty interchangeably. Even so, may not be impossible to get from the accounts.

The ONS, however, have a special definition - they want to know the actual money received. I.e. what went in to the bank.

OK, that is again not either of the dictionary definitions, as we "earned" money simply for doing work and invoicing for it even if that money has not yet arrived. Even so, that is not too hard to find. We have the banking data, we can look at the total of incoming payments.

But no, they want the VAT exclusive total of received payments. Now that is harder. Whether a payment has a VAT element depends on which invoice it relates to. If someone sends money we will allocate by default to the earliest invoice. Now if that was a late payment penalty with no VAT then that payment has no VAT. If we then find they did not pay the late payment invoice but a later invoice, when we re-allocate the payment, now it does have VAT as part of it.

So working out the VAT exclusive value of payments is both complicated, and can change after your worked it out.

It is also odd as we have people that we trade both ways with and the actual money transferred either way will be the balance, and not reflect what we have invoiced at all. This will probably account for many thousands, and so will impact their statistics.

Why on earth are they picking such an obscure statistic to collect, and why not simply ask for actual total money instead of expecting us to work out a VAT exclusive figure. And finally, why are they not asking the bank! I suspect they have the power to.

Update: We called back with the figure, and now they say "no, we want the VAT exclusive invoice total". Here is the call recording to prove we are not going barmy here (MP3).

9 comments:

  1. Assuming the definitions have not changed then turnover as defined by the ONS is here: http://ec.europa.eu/eurostat/cache/metadata/EN/sts_ind_tovt_esms_uk.htm

    As you would expect it's basically the VAT-exclusive total of all invoices raised during the period.

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  2. Tell the ONS to clear off and stop wasting your time? If they want stats they can go and look at Companies House. Besides that data, the rest is confidential to your firm surely?

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    1. Sadly I think they have laws requiring us to answer!

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    2. They're compulsory - the ONS can do other annoying things like randomly select a specific employee for detailed stats to be returned regularly, which is very tedious.

      Personally wouldn't put too much effort into the specific numbers, though - just put something reasonable down and send the form back...

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    3. I had some silly ONS person asking me questions at LHR one morning. Told her to clear off as I don't do surveys and I was already granted UK entry and was free to go. She threatened to call the police on me. She lost. She got no information from me. Jumped up idiot in a yellow jacket who thought it gave her power. It didn't.

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  3. Maybe send them an admin charge?

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    1. And just hope they don't ask for your current month total or you'd end up in an infinite loop!

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  4. Asking the bank wouldn't get them the VAT aspect - they'd see a £1200 deposit, but have no indication whether that was £1000+VAT or £1200 with no VAT applicable.

    I suspect getting the VAT data from HMRC plus bank transfer data from banks would give a much better picture more efficiently though.

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  5. It sounds like that caller doesn't have accounting knowledge and does not understand the distinction between posted income and actually receiving payments. But is trying to explain the definition anyway.

    She kept falling back to "income for the month", seemingly believing that this is an unambiguous definition.

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