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Interest income - Company accrual

Company has invested £2m cash. held under 12 month Deposit plan.

Period of investment from 1 Jan 2011 until 31 December 2011.

Interest receivable during period will be £82,000.  Paperwork provides that interest will be paid under deduction of income tax.  Therefore £16,400 will be deducted and £65,600 was actually received Jan 2012.  (no idea why this has been set up like this)

Company accounting period for the period to 30 June 2011.

I would ordinarily bring in £42,000 as gross interest receivable (non trading, D111 credit).  What about the credit?  Can I take credit for income tax not yet suffered?  or do I need to wait until the period in which the company suffers the tax. 

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Accrue gross

The tax is only deductible when the interest is paid, so you should accrue 181/365 of £82,000 gross interest income at 30 June 2011.  The £16,400 of income tax deducted in January 2012 will not be available for set off against the CT liability until the year to 30 June 2012

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I thought as much but may I quote a client from yesterday...

"but thats not fair" !

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invested..with whom?

this sounds like a possible error by the deposit taker - LTD CO = GROSS interest.  

So providing the bank account or investment product application was as  xyz LTD then the institution has  been somewhat 'negligent'  Also creates a cashflow issue [ less receipts @ maturity ] and a tax issue having been paid net, not being recoverable for a number of 'years'  ie accounts for ye jun12 with returns completed/ filed in 2013

 

had a similar issue recently with a Bank and a LTD Co and they provided all sorts of rectification and compensation

 

 

[sorry for the shout = merely emphasis ]

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I agree that this has been set up incorrectly.

At this point in life I just can't get worked up about this sort of thing anymore!

 

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