Micro-entity Profit and Loss

[ubf100]

I am trying to file jointly with HMRC and companies house via the HMRC website and have a question about the Micro Entity Profit & Loss. The Micro Entity Profit & Loss has the following fields :


Turnover - Also called sales, revenue or income. The total amount this period from selling goods or services, not including VAT.

Other income - Any other income not included in turnover

Cost of raw materials and consumables - The costs of buying or producing the goods or services sold, for example, materials used to make products.

Staff costs - Salaries or wages paid by the company for work done this period, including employers' National Insurance and the cost of a payroll service.

Depreciation - The amount the company wrote off assets this period to reflect the fall in their value over the period.

Other charges - Any other spending for the period, not including fixed (physical) assets.

Tax on Profit - Work out Corporation Tax due on company profits using the latest rates. Company profits = turnover plus other income, minus all outgoings.

Profit (or loss) - Calculation: Turnover plus other income, minus all outgoings, minus tax.


Q1]Are costs e.g. “staff costs” entered as positive (as opposed to negative) numbers in the form? I presume the answer to this is yes (that costs are entered as positive numbers) because otherwise the form would not say “minus all outgoings”.


Q2]Both “Tax on Profit” and “Profit (or loss)” say “minus all outgoings”. Does the outgoings include depreciation?


Q3]Are the following statements correct :

Company profit = (Turnover) + (Other income) – (Cost of raw materials and consumables) – (Staff costs) – (Depreciation) – (Other charges)

Tax on Profit = 0.19 * (Company profit)

Profit (or loss) = (Company profit) – (Tax on Profit)


Thanks

 

[CA85]

Q3]Are the following statements correct :

No.

My suggestion is that you pay an accountant to get this right for you.

 

[ubf100]

I guess purchases I make which go on the balance sheet (i.e. assets) would not appear in the Profit and Loss and would instead appear in the Balance sheet. Would this be why the relations would not hold? I have an example from the Mercia group which I wanted to share but unfortunately I cannot post links yet. Thanks

 

[MyAccountantOnline]

I guess purchases I make which go on the balance sheet (i.e. assets) would not appear in the Profit and Loss and would instead appear in the Balance sheet. Would this be why the relations would not hold? I have an example from the Mercia group which I wanted to share but unfortunately I cannot post links yet. Thanks

Not sure what you mean when you say 'Would this be why the relations would not hold'

Bear in mind depreciation isnt an allowable expense for CT purposes and dont overlook capital allowances on the capital expenditure on the balance sheet if applicable.

 

[ubf100]

@MyAccountantOnline Thanks. The relations I was talking about were :

Company profit = (Turnover) + (Other income) – (Cost of raw materials and consumables) – (Staff costs) – (Depreciation) – (Other charges)

Tax on Profit = 0.19 * (Company profit)

Profit (or loss) = (Company profit) – (Tax on Profit)

 

[MyAccountantOnline]

@MyAccountantOnline Thanks. The relations I was talking about were :

Company profit = (Turnover) + (Other income) – (Cost of raw materials and consumables) – (Staff costs) – (Depreciation) – (Other charges)

Tax on Profit = 0.19 * (Company profit)

Profit (or loss) = (Company profit) – (Tax on Profit)

Tax isn't 19% of the company profit - you need to adjust for expenditure which isn't allowable for tax which will include depreciation and adjust for expenditure and allowances which doesn't appear in the P&L account eg capital allowances.

 

[ubf100]

@MyAccountantOnline So suppose I made a purchase of a computer for £500, for which I was claiming capital allowance. Would an adjustment for this appear in the Profit & Loss? If so in which field of the Micro-entity profit and loss form :

Turnover
Other income
Cost of raw materials and consumables
Staff costs
Depreciation
Other charges
Tax on Profit
Profit (or loss)

Would it appear? Thanks

 

[Scalloway]

The depreciation for the computer would appear in the Profit and Loss Account. You would add it back when doing your tax calculation.

 

[ubf100]

@Scalloway @MyAccountantOnline : Would the following statements be correct? :

1)The computer (for which capital allowance is being claimed) will not appear in any of the outgoings of the Profit and Loss
2)It will be reflected in the "Tax on Profit" and the "Profit (or loss)" figures of the Profit and Loss.
3)In addition it will appear in the "Total fixed assets" part of the Balance sheet.

Thanks

 

[Scalloway]

1) It should be depreciated and this goes through the Profit and Loss Account
2) Depreciation is added back the Annual Investment Allowance will be deducted from the Profit and Loss Account profit to give taxable profit
3) The cost less depreciation will appear under Fixed Assets.

 

[ubf100]

@Scalloway Thanks that was very helpful and I think I understand :

"Profit before taxation" : this includes depreciation.

"Net trading profit" = "Profit before taxation" - "Capital expense" + "Depreciation"

Now "Net trading profit" does not include depreciation, since it has been added back on.

"Corporation tax" = 0.19 * "Net trading profit"

Then if "Profit (or loss)" is the field of the HMRC Profit and Loss form (defined as "Calculation: Turnover plus other income, minus all outgoings, minus tax."), we calculate via :

"Profit (or loss)" = "Profit before taxation" - "Corporation tax"

Then as you mentioned the cost less depreciation will appear under the Fixed Asset part of the balance sheet.

 

[Lisa Thomas]

I would politely suggest you pay an accountant to help you deal with the accounts properly. it's risky if you get them wrong.