Calculating tax for LTD

[D2D1]

I have a new limited company - how do I calculate the tax for the income statement? Do I just put it as 21% of the profit?

Thanks

[David Griffiths]

I have a new limited company - how do I calculate the tax for the income statement? Do I just put it as 21% of the profit?

Thanks

Unlikely, but it depends on what your income and expenditure is made up of.

You have to do a tax computation, starting with the profit in the accounts, adding back all of the expenditure that is not tax deductible (including but not limited to depreciation, entertainment, capital expenditure, some interest payments) deducting any income that is not taxable as a trade receipt (even if it is to be shown as taxable elsewhere on the tax return and then deducting capital allowances and/or annual investment allowance on capital items, calculated in accordance with the rules.

Then you add this figure to other sources of taxable income then deduct any annual charges paid (generally certain items of interest) to calculate the tax, which will be at 21% if the profits are less than £300,000 per annum

And that's about as simply as it can be put. :)

And yes if things are very simple then it might be 21% of the accounts profits, but that's very rare

[CNEO]

Hi,

21% will not be too far off the mark however there are some other considerations which will affect the tax charge. Principally:
-Items which are not tax deductible (e.g. depreciation and entertainment).
-Items on which you receive accelerated tax deductions (certain fixed asset additions)

You may also need to provide for deferred taxation in the accounts which is an accounting adjustment to account for the unwinding of accelerated tax deductions or in some cases the reverse can apply.

Certainly this is one of the most tricky areas to get right!

[elainec100@cheapaccounting]

Read the notes to the CT600 which is the form you need to complete with your tax comp and full accounts to HMRC:

http://www.hmrc.gov.uk/ctsa/ct600-guide-2009.pdf

Sorry to say I haven't seen many of these completed correctly by non accountants - especially in the first year of trade when it is likely that you will need two returns for the accounting period.

[Robski]

get a professional or you'll go grey in a matter of weeks. I'm pretty good with numbers as far as P/L stuff goes, but put a tax return of any sort in front of me and I start rocking gently in my chair! next comes out a bottle of vodka just to calm me down... :D ...

[elainec100@cheapaccounting]

I'm pretty good with numbers as far as P/L stuff goes, but put a tax return of any sort in front of me and I start rocking gently in my chair! next comes out a bottle of vodka just to calm me down... :D ...

me too :eek::eek::eek:

And I am an accountant