Accounting for corporation tax

[Deleted member 232475]

Hi. Small business owner and amateur accountant here so please be patient.

I'm trying to get clarification on when I should be accounting for CT charges. If I'm completing a CT600 for the year ending X and I have my P&L report and balance sheet in front of me, should the CT charge for year ending X be factored in? i.e. as an expense on the P&L sheet and a liability on the balance sheet. Surely I would not know this value until I have completed the CT600 anyway unless I worked it out myself ahead of time?

My confusion is that this extra expense would change the P&L for the year and therefore in turn the amount of CT payable for that year - a circular reference if you will.

My best guess is that it is not accounted for until after the submission of the CT600. Then it can be added as a journal entry? Would this be backdated to the last day of the accounting year.

I'm a quickfile user if that is relevant. Any help would be greatly appreciated as I'm sitting here tieing myself in knots!

 

[kevin.doran]

Yes it goes in the accounts but it's not an expense for CT purposes (you can't get tax relief on the tax itself obviously).

Just so you know, there are other adjustments you potentially need to make for tax purposes before submitting anything. What the P&L shows and what you actually pay tax on can be two very different things i'm afraid.

 

[Deleted member 232475]

Thanks Kevin. Much appriciated.
Just to clarify does this mean that the CT shouldn't appear as an expense on a P&L report (and I'm therefore doing it wrong in the software) or that I need to adjust elsewhere to account for the fact that it isn't tax deductible?

 

[john1989]

Running a report from software isn't the same as producing compliant accounts.

The CT appears on both the P&L and balance sheet.

 

[UK Contractor Accountant]

Don't forget the deferred tax provision as well????

 

[john1989]

Don't forget the deferred tax provision as well????

Don't you just print that report off in QuickFile?

 

[Philip Hoyle]

Yes, a debit in the P&L and a credit to the balance sheet, dated the last day of the accounting period. Yes, you will have to do the tax calculation and make the journal adjustment manually. There's no circular calculation problem as corp tax appears in the statutory P&L at the bottom whereas the starting point for CT calculation is the "pre tax profit".

But your post is worrying. Have you even prepared the P&L properly? Have you accounted for stock movements, accruals, prepayments, debtors & creditors, work in progress, etc. Do you know which expenses are allowable for tax and which aren't? Do you know the fundamental difference in accounting for asset purchases between the P&L depreciation and capital allowances for tax?

You really need to do the full statutory accounts, adjusted for all the above, and complying with accounting standards and Company Law, and the tax computations, BEFORE the figures go anywhere near the HMRC/CoHouse online filing systems - their systems are no alternative to the accounts/comps required - they're just an abbreviated form to make submission easier. You seem to be missing an important part of the process and trying to take a short cut straight to the submission system.

 

[Energise Accounting]

I must admit the OPs post did worry me as I don't think they have the knowledge to complete a set of accounts.