CALBookkeeping
Blogger
0
863

# AAT Level 4 Student in Need of Help!!

AAT Level 4 Student in Need of Help!!

• ### VAT Flat Rate Scheme - plant repairs & tools

Hi everyone. Just wondering if someone could give me a little help, please. I am stuck on a question I've come across in my Business Tax studies, and I'm unsure at which point to calculate the Corporation Tax. The info is as follows:

### Profit and loss account

2015   2014
£   £
Retained profit ( loss ) at 01 November 2014 (30,665)   2,409
Profit ( loss ) for the year 70,410   (33,074)
Dividends paid 16,777   -
Retained profit ( loss ) at 31 October 2015 22,968   (30,665)

At which point do I calculate the CT for year ending 31 Oct 15? Do I deduct the loss from the previous year and then calculate the CT due i.e. 70,410 - 30,665? Or is it calculated on the full £70,410? If the latter, where does the loss get incorporated as relief?

Lisa

### Replies

26th Feb 2016 17:22

£70,410

You should start the computation with the profit for the year of £70,410.

As far as the losses are concerned, it depends what happened to the losses in the computation for the previous year. If they were not used in some other way (set against other income or carried back to earlier years) they would have to have been carried forward. If so, the losses can be set against this year's profits.

Thanks (1)
26th Feb 2016 18:04

Thank You

Thanks - as far as I can understand it the losses were carried forward, so assuming that this is the case in the scenario, would I start with the £70,410 within the computation, add Depreciation, less Capital Allowances, then subtract the Loss carried forward (£30,665), with CT due being 20% of the balance?

Many thanks.

Thanks (0)
26th Feb 2016 20:24

@ CALBookkeeping [OP]

There is one important error [almost certainly - see my 4th paragraph below] in your last post.    In your suggested CT Computation, you have deducted the £(30,665) adverse balance on the Profit and Loss Account at 31 October 2014 [ ie the cumulative Loss figure, per the Accounts, at 31 October 2014].

In fact, that is not the correct figure to use - the correct figure to use is the cumulative Loss figure carried forward at the end of the previous year to 31 October 2014 as per the Corporation Tax Computation for the year to 31 October 2014 [not the Loss figure carried forward per the Accounts themselves].

To explain, you correctly comment that you will be adjusting Depreciation and Capital Allowances, for the year to 31 October 2015, on the year to 31 October 2015 CT Computation [I assume that there are no other "disallowable" items, incidentally, to add back].

It is only in the extremely unlikely event that the Depreciation [and other disallowables, if any] have been exactly the same as the Capital Allowances, in total, from the start of the company to 31 October 2014, that the Loss carried forward at 31 October 2014 per the CT Computation will be precisely the same as the Accounts figure of £30,665.

Apart from that rather important probable error, your last post is fundamentally correct.