Hello,
In my first year of trading (in which I made a profit) I submitted a CT600 form to HMRC (using the joint filing service). In the profit/loss section I stated that I had paid no tax. Once I had filled in all the details I was told how much tax I would have to pay.
My question is - should this tax payment be reflected in the profit/loss section of the CT600 I complete for my second year of trading?
Many thanks,
John
Replies (5)
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Ah yes, not so easy, is it!
You may have read the following comment before, but I shall say it again - look for an accountant. You will be amazed at what you don't know about full statutory accounts etc.
Agree wholeheartedly with the above. Given your obvious lack of understanding of this simple issue, there are almost certainly numerous other errors in your accounts and tax returns that will very probably get you into trouble if you do no take proper steps to sort them out.
Ooops !
What you pay or receive in the year is irrelevant. It's what period to which the item belongs.
So, for sales, it's the invoices you issue, not the money you receive.
I take it you read all the notes and instructions before you submitted the return ?
Corporation tax liability
The correct way of doing things is to show in the accounts for the year the corporation tax liability on the taxable profit of the year.
The problem that you have is that until you get pretty much to the end you do not know that figure.
The correct approach is to calculate the corporation tax liability before finalising the accounts - but in order to do that you have to understand how corporation tax works.
So your error was in saying in the accounts for the first year that there was no corporation tax due.
If you need more help (& you probably do) go see an accountant.
David
P.S. There may also be tax implications of timing differences leading to deferred tax.
To answer the question
The answer to your question is no, the tax you pay during year 2 should have been entered on the year 1 profit and loss account. That's because it's the tax on year 1's profit.
The tax which you should enter on the year 2 profit and loss account is the tax you pay nine months into year 3.
And that's assuming that you have no deferred taxation, which would be an added complication.