Corporation Tax

Corporation Tax

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A simple question I hope

Regarding CT and the sequence of event from calculation to payment

Can someone explain the sequence of CT with regard to Annual Accounts and CT600

Am i right in thinking the following

Complete Annual Accounts for Y/E

Then File CT600 and get the CT liability

Then adjust the AA with regard to the tax payable and liability

Then file AA with Companies House

Then pay the CT within the next 12months.

Thanks in advance for your response.

Replies (9)

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By thisistibi
16th Apr 2012 08:33

Indeed there is a bit of circularity which you have identified, whereby the tax computation needs to be prepared based on the accounts, but the accounts cannot be prepared without a tax computation.

The typical procedure is to prepare a high-level tax computation based on the first draft of the accounts, such a high-level computation would not normally be very time consuming.  Then the accounts are finalised on those estimated tax numbers, and then once the accounts are signed more time and detail can be spent on the CT600 to ensure it is correct and complete.

That is the best process as it does not unduly delay the accounts, and also it does not result in wasted time if a late journal is required in the accounts, after the tax comp has been prepared.

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By DMGbus
16th Apr 2012 08:35

Missing steps

After annual accounts are drawn up and agreed with the directors compute the CT liability.  

Adjust the accounts for the CT liability (put a provision in creditors).

Finalise the accounts for signing and approval by the directors.

Then proceed to filing figures with Companies House and HMRC online and ensure that CT is paid no later than 9 months ("and one day" to be pedantic) after FYE.

In practice filing with Companies House is sometimes done before filing with HMRC in view of shorter deadline after FYE.

 

 

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By andy.partridge
16th Apr 2012 09:46

No

It is you who calculates the CT liability. You will show it on the CT600. You must update the annual accounts to reflect this as you will be attaching them in support of the CT600.

You give the impression that you would file the CT600, wait for HMRC to come back and tell you the CT liability and then complete the accounts. That's certainly incorrect.

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Euan's picture
By Euan MacLennan
16th Apr 2012 11:17

Tax is an essential part of the accounts

I think I agree with Andy, although I am not quite sure what he is saying.

You prepare accounts and come up with a figure for the profit before tax.  You then calculate the corporation tax liability and deferred tax liability and include them in the accounts.  At that point, you agree the accounts with the client, not least because the figure they often find most interesting is the amount of tax they have to pay.  If there are any adjustments to the profit, you will have to adjust the current tax and possibly, the deferred tax.  You then perform your iXBRL tagging and make any adjustments to the wording of notes that may be required.  If you intend to e-file the accounts at Companies House, you prepare e-file accounts and make any adjustments to the wording that may be required for that purpose.  Only then should you finalise the accounts for signature by the client.

We also prepare the CT600 before finalising the accounts to double check the tax figure.

You have 9 months from the accounting date to file the accounts at Companies House, 9 months plus 1 day to pay the corporation tax and 12 months to file the CT600.

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By Steve Kesby
16th Apr 2012 11:34

I agree with thisistibi

Thisistibi is coming at this from the larger company perspective.  The accounts do need to have figures in there for current and deferred tax, with related disclosures, but they don't need to be completely accurate (as long as they're not materially inaccurate).  You just adjust the figures in the following year by way of an under/over provision.

Smaller company clients do prefer these things to be right, and it's a complication removed if they are, which is where I think everyone else is coming from.

As Euan says, once the accounts are complete and approved, they're due for filing (generally) within 9 months from the ARD.

Obviously, there's a concensus that the CT600 that's due for filing (generally) 12 months after the ARD should be completely accurate.

The tax payment is to a certain extent a completely separate issue.  Ignoring the possibility of payments on account (for company's paying at the main rate of CT), the tax is due 9 months (plus a day) after the end of the CT accounting period, and you should pay your best estimate.

At the moment, you will just be charged interest if you fail to pay on time, but I believe that there are payment failure penalties in the pipeline.

As Andy says, all of that is up to you (the company or agent).

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By thisistibi
16th Apr 2012 11:45

All the same

I think everybody is saying pretty much the same thing, but in their own way.  You need to do some tax computation work before you finalise the accounts, and some after.  We could debate how much you do before and how much after, but the answer probably depends on the preferences, and perhaps the size and complexity of the client.

Assuming that the tax charge in the accounts must exactly equal the actual tax charge in the submitted CT600 is a mistake - that is certainly not the case for most large companies, and at best is just a preference of the accountant or client for smaller companies.  The tax figures only have to be estimated in the accounts.

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Replying to Chris Ash:
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By User deleted
16th Apr 2012 12:10

Estimated tax

thisistibi wrote:

The tax figures only have to be estimated in the accounts.

Agreed - with one caveat. Watch out for the client that moans when the tax actually payable is £3.47 more than that shown in the accounts. Yes, honestly, that was a complaint that I had last year! I could perhaps (just about) understand if the accounts showed nil liability but in this case it was in excess of £8k. He complained that as a 'proper' accountant, I should have had the liability spot on. I advised him that our discussion on the matter had cost him about 30 times the tax difference.  I'm delighted to say that he's now someone else's problem.

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By patricklynch81
16th Apr 2012 12:41

thanks everyone for your replies. It is much clearer now.

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By thisistibi
16th Apr 2012 13:06

@BKD

That's a good story.  Reminds me of when I started working in tax, when I prepared one of my first SA100s and I rounded up any income amounts over 50p.  The client spent some time admonishing me at disproportionate length (i.e. that income should always be rounded down), but to be fair he was quite right in that particular case.... but the memory sticks firmly in my mind!

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