Good evening
I picture a lot of guffawing with laughter at this question but I am seriously confused.
I have a client who was due to pay £1300 in CT at the end of his last financial year. It is still showing as a creditor in the current year accounts, and he has made a loss. I have worked out that the new liability is £120 so I clearly debit creditors £1180, but where on earth does the other side go?
Its easy if you know the answer I am sure!
No mocking please I am ashamed enough :)
Many thanks for your kinds responses!
Replies (13)
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No PYA note
I will also put in a prior year adjustment note I guess?
You don't need a prior year adjustment note. You just need to analyse the current year tax charge (or credit) into its current / prior year components. This is dealt with within the tax charge note, not in a separate note.
The whole of the change is credited to P&L. That part that results from the carry back of this year's loss is current year CT. The remainder, if any, will be the difference between last year's estimate and the actual liability for last year before taking account of the loss carried back. That part is the adjustment in respect of prior years in the P&L charge.
I don't think there should be Peter. My post explains what I believe to be the correct treatment.
I know. That is why I have
I know. That is why I have been helping to correct his misunderstanding.
No No No
Why are you doing the net charge for two years in one years accounts?
You only have to enter one tax charge/credit in each years P&L account.
Mixed up
Why are you doing the net charge for two years in one years accounts?
You only have to enter one tax charge/credit in each years P&L account.
Think you misunderstand Peter.
Tax charge in last year's accounts was £1,300. That was correct at the time.
In this year's accounts we have a loss which is being carried back (either to generate a repayment of £1,180 out of the £1,300 that has been paid, or to reduce the unpaid amount from £1,300 to £120 - it doesn't matter which).
The P & L entry to reflect this is a credit in the CY line in the tax charge.
Perfect in every detail and beautiful in its simplicity. What's wrong with what Leigh is proposing to do?
I think you may be getting mixed up. "The net charge for two years" is £120. This is not being shown in "one years accounts" but two. Namely £1,300 last year and £1,180 credit this year.
I can see that now
It's a very weird way to explain things. I would have said what the charge or refund was each year rather than the net balance outstanding.