Corporation Tax: Timing/Cashflow Problem

Corporation Tax: Timing/Cashflow Problem

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Hello, and thanks in advance for any help provided. 

Our Ltd's First accounting period ends 10 June 2015. The thing is, in March 2015 we will be receiving a big sum of money from crowdfunding sources. 

That upfront influx will make us very susceptible for CT, as we won't have time to make every expense we need to make before the deadline. 

The obvious option is to make expenses quick, but sadly that won't be possible from one point on.

Might there be other options, such as extending or shortening the Accounting Period? How does it work if we extend it beyond June 2015, to, say, December 2015? What about shortening it to, say, February 2015? How does changing the Accounting Period affect the deadline for CT?

Thanks!

Replies (13)

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By johngroganjga
15th Dec 2014 10:11

Are you sure that your company's first accounting period ends on 10 June?  Are you sure it's not 30 June?  Have you checked what the Companies House website says the company's accounting reference date is?

Why do you thing receiving crowdfunding investment has anything to with how much corporation tax the company will have to pay?

But in any event aren't these all questions for the accountants who will be preparing the company's first accounts and dealing with its corporation tax affairs for you?

Yes you can extend or shorten the accounting period but your accountant will explain the pros and cons and the practical implications of doing so. 

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James Reeves
By James Reeves
15th Dec 2014 10:12

Accountant

Surely this is a question for your accountant?

If you don't trust your accountant enough that you feel the need to post a question here, you should be finding an accountant that you are more comfortable with.

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Stepurhan
By stepurhan
15th Dec 2014 10:19

See an accountant

This is one of those questions where face-to-face advice from someone with all the facts is probably vital. A few thoughts to be going on with.

This is probably something you should have thought about beforehand. Going ahead with plans without taking advice of the tax consequences first is a recipe for disaster. This time round you appear to have appreciated the problem at a stage when it might still be fixable. That might not always be the case, and you should always take advice before starting out on any major activity.

My experience of crowd-funding is that the money is raised over a relatively short period of time. It seems unlikely that you are certain of receiving a large sum of money from it in 3 months time. In fact, there is a distinct possibility you haven't even started the online campaign yet. Are you just being optimistic that your crowdfunding campaign will be a success?

Shortening the period would be a potential short-term solution. Once you've done it once, you won't be able to do it again within 5 years, so be sure that is really what you want to do. The Companies House filing deadline and CT deadline (assuming already trading) are moved forward by a shortening of the accounting period.

 

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Replying to wilcoskip:
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By makurre
15th Dec 2014 10:38

Thanks :-)

Yes, you are right, we are being optimistic when we say we will run a successful campaign, but we have actually created some buzz around it and the possibility is there. That is why we asked these questions to ourselves, because it's becoming a too realistic possibility. And definitely we should have contacted a tax advisor, but we were promised one by our University and we are still waiting :-(

 

 

 

 

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Replying to wilcoskip:
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By makurre
15th Dec 2014 10:38

Thanks :-)

Yes, you are right, we are being optimistic when we say we will run a successful campaign, but we have actually created some buzz around it and the possibility is there. That is why we asked these questions to ourselves, because it's becoming a too realistic possibility. And definitely we should have contacted a tax advisor, but we were promised one by our University and we are still waiting :-(

 

 

 

 

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By makurre
15th Dec 2014 10:23

The thing is that this is a personal project in which we can't afford to put too much money. If we achieve the crowdfunded money (which as far as I know counts as pre-sales, and thus, earning), then we will be in a position to hire a accountant. 

But we want to end this first period without having to put too much upfront. And we haven't even traded really (although we are not dormant).

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By johngroganjga
15th Dec 2014 10:31

So these are questions for you to store up to ask your accountant if and when you appoint one.

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By petersaxton
15th Dec 2014 10:52

Remember

Penny wise and pound foolish?

This is a good example.

Get an accountant and he will be able to advise you. It's not going to cost you a lot for a bit of advice from somebody who knows your full circumstances and you really do need it!

 

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the sea otter
By memyself-eye
15th Dec 2014 11:10

isn't crowd funding

Funding (ie a loan/debenture/overdraft/equity etc). How can it be sales?

 

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Replying to Desert Orchid:
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By User deleted
15th Dec 2014 11:21

I agree

memyself-eye wrote:

Funding (ie a loan/debenture/overdraft/equity etc). How can it be sales?

 

I agree, at the very least it is a deposit until the goods (?) are actually despatched to the 'customer'

In that sense, there is no sales revenue until the goods are actually 'sold' - and that obviously cannot happen until they've actually been produced. Therefore, no CT liability until the goods are made and sent - at which point there will be costs to offset the sales.

 

VAT is another issue - VAT payable in respect of the quarter(period) when the goods are received, as up front payment crystallises the VAT point

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Replying to Desert Orchid:
Stepurhan
By stepurhan
15th Dec 2014 11:30

No it isn't

memyself-eye wrote:
Funding (ie a loan/debenture/overdraft/equity etc). How can it be sales?
Crowd-funding is not any sort of loan or equity. It is monies provided with the incentive of promised rewards (usually including a copy of the final product for all but the smallest donations).

Deferred consideration is a possibility assuming that the rewards aren't available now. It is tricky though as, once a campaign is successful, there is really no way for funders to get their money back if the whole project folds. It would therefore seem that, on a purely legal basis, unfettered rights to the money pass the moment the campaign is successful.

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By godwinsj.hotmail.com
15th Dec 2014 11:54

It could be equity

That's what crowdcube for example do , they raise equity via there platform

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Replying to lionofludesch:
Stepurhan
By stepurhan
15th Dec 2014 12:05

I stand corrected

godwinsj.hotmail.com wrote:
That's what crowdcube for example do , they raise equity via there platform
That is the first time I have seen a crowd-funding website that offered equity based investment.
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