Company Accounts

[mundaneasf]

Hello everyone

I have a few questions regarding my very small company accounts

I have prepared the accounts which successfully balanced. I am now entering these figures onto the HMRC software and have gotten a little stuck. The part I am stuck on is section 2 (the Accounts) and more specifically the Taxation part of the Accounts Notes section.

Below are a few questions which I would be grateful if you could help me with.

1. UK Corporation Tax (Box AC108): From what I have read online this is the same as box AC34, which is the actual tax due for the year: Net Profit + Depreciation – Capital Allowances (first year so no losses b/f). However the HMRC software says that Box AC112 is actually supposed to be the same as Box AC34? So my question is: Should Box AC108 be Net Profit + Depreciation – Capital Allowances and match up to Box AC34 (assuming there is no Deferred Tax)
2. Deferred Tax (Box AC110): From what I understand the Deferred Tax box can be used for accelerated capital allowances (which are a timing difference?) But from there I can’t quite grasp when I would use this box. There is an accelerated capital allowances box below (AC229) but this affects the balancing of boxes AC108 and AC233. Box AC110 (Deferred Tax) doesn’t affect the balance of the figures on that page, only the balancing between boxes AC112 and AC34. So can someone explain when I would use this box?
3. Profit or (loss) on ordinary activities before taxation multiplied by the rate(s) of Corporation Tax applicable (BoxAC327): Now this box has me really confused. Its wording suggests it should be box AC325 (above) multiplied by the rate of corporation tax applicable. However what does the rates of corporation tax applicable mean? To me it means 20% as that is the tax rate applicable to my company (small profits rate). I was 90% sure that I should use 20%, however as I wasn’t certain I clicked on the “?” for help. It suggests I should calculate using the Standard Rate of Corporation Tax. The use of these two phrases has meant that the “?” which is supposed to be used for help has just confused me more. I decided to phone HMRC Corporation Tax who suggested I speak to Online Services who in turn suggested I speak to Corporation Tax . So I decided to use their website to try and determine what “the Standard Rate of Corporation Tax” actually means. However it appears the wording doesn’t match up on their website either, making matters even more complicated! The HMRC website states that there are two rates of Corporation Tax, “Small Profits Rate” and “Main Rate”. I was aware of both rates but not their exact names. Neither of these names on their website link up with the names used on their software… (That’s four different terms used “Corporation Tax Applicable”, “Standard Rate of Corporation Tax”, “Small Profits Rate” and “Main Rate”). What’s really frustrating is that “Corporation Tax Applicable” sounds like the “Small Rate” and the “Standard Rate of Corporation Tax” sounds like the “Main Rate”… Now that I’d hit a brick wall I decided to assume for now that I need to use the small rate of 20%. This is because I was originally 90% sure it was correct and it was my first thought.
4. Now jumping to box AC231 (Any other adjustments). I have clicked on the “?” for help with this box. It states that if the top box (Box AC108) does not agree with the bottom box (Box AC233) due to the use of the standard rate of corporation tax please enter any correcting amount in Box AC231 (aka this box). A brief explanation should be included in the taxation note below blah blah. So does this mean that actually I’m wrong and that the “Corporation Tax Applicable” is not actually the rate which is applicable but is the rate that is not applicable which is actually the “Main Rate” which is also described as the “Standard Rate of Corporation Tax” although neither is mentioned together in the software or website?
5. Expense not deductable for tax purposes (Box AC227): Can you explain this box a bit more? If I had a VAT fine I can’t get relief on this which I understand. But I’m wondering why Depreciation is deducted from box AC325 (Profit or Loss Before Tax) but VAT fines aren’t? If I had a VAT fine which came out of the company’s bank, would the double entry not be to reduce box AC32 (Profit or loss on ordinary activities before taxation) by way of an expense (then later disallow in the computations)?
6. Accelerated capital allowances (Box AC229): From what I understand accelerated capital allowances is when capital allowances are claimed on an asset faster than it is depreciated? E.g 100% AIA when an asset is depreciated at say 20%? If this is the case what happens when capital allowances are claimed on an asset at a lower rate than depreciation (say 18% WDA reducing balance compared with 25% straight line depreciation). If my asset is valued at £3,000 and I estimate its useful life to be 4 years (therefore setting depreciation at 25% straight line) and capital allowances are claimed at 18% reducing balance, do I enter the difference as a negative in Box AC229 (Accelerated Capital Allowances)?

That’s all, thank you to anyone who takes the time to read the above

Mundaneasf

 

[Scalloway]

1. They should be all the same figure

2. Deferrred tax is the difference between the tax due when capital allowances are claimed and the tax effect of the company's depreciation charge

3. Use 20% for corporation tax

4. You can ignore this

5. Depreciation is taken out and replaced with capital allowances. Disallowable expenditure is a diffrerent type of expenditure.

6. See 2

 

[mundaneasf]

Thanks for your reply Scalloway

1. They should be all the same figure

AC34 and AC112 have to be the same for the software to allow you to proceed. However box AC110 (Deferred Tax) affects Box AC112. So do you mean they have to be the same unless you have deferred tax?

2. Deferrred tax is the difference between the tax due when capital allowances are claimed and the tax effect of the company's depreciation charge

I can understand that but don't understand how you use the box for accelerated capital allowances, as there is another box specifically for accelerated capital allowances below which affects the final box differently to the deferred tax box.

3. Use 20% for corporation tax

4. You can ignore this

I know you've said to use 20% and to ignore the Any other Adjustments box, but when would you have to use Box AC231?

5. Depreciation is taken out and replaced with capital allowances. Disallowable expenditure is a diffrerent type of expenditure.

6. See 2

I am a little confused by a few things so if you wouldn't mind, would you possibly fill in the boxes below based on some fictitious figures? This might help me understand the section better.

Turnover £8,000
Expenses:
Rent £500
Telephone £500
Depreciation £1,000

Asset purchased for £4,000
Depreciation @ 25% £1,000
Capital Allowances @ 18% £720
Corporation Tax Small Profits Rate @ 20%

UK Corporation Tax: AC108 =
Deferred Tax: AC110 =
Tax on profit or (loss) on ordinary activities: AC112 =

Profit or (loss) on ordinary activities before taxation: AC325 =
Profit or (loss) on ordinary activities before taxation multiplied by the rate(s) of Corporation Tax applicable: AC327 =

Please enter any factors affecting the tax charge in the fields below.
Expense not deductable for tax purposes: AC227 =
Accelerated capital allowances: AC229 =
Any other adjustments: AC231 =

Current tax charge or (credit): AC233 =

Again many thanks, its much appreciated

Mundaneasf

 

[mundaneasf]

Hi

To anyone reading

Do you know when you would use the Deferred tax box? (AC110)

If your Capital Allowances are not accelerated (Depreciation is greater than capital allowances), do you use the accelerated capital allowances box below (AC229) as a negative to show the difference between Depreciation and Capital Allowances?

Thanks