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Profit and loss tax

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Why is the amount of corportion tax in the P&L account: £14,000 more than what is due to HMRC: £12320?  The accountant mentioned an adjustment for capital allowances, shouldn't this be on the profit & loss account for the published accounts?

Thanks

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By Wanderer
10th May 2021 13:45

Are you an accountant?
Just that here:-
https://www.accountingweb.co.uk/any-answers/training-agreement-buyout
you mention 'my client' a number of times.
Your question however suggests that you may not be an accountant.

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By Paul Crowley
10th May 2021 13:49

Not enough detail
FRS 102 or 105 (Micro)?
Was the tax paid for prior year bigger than the tax creditor
Was interest paid on late payment of tax
P & L just looks very round sum

But best person the ask is the accountant.

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Replying to Paul Crowley:
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By Loc
10th May 2021 14:59

FRS 105 Micro. I can see the difference is from capital allowance. I was querying whether the P&L account should show the actual amount of tax due, or the tax due before AIA adjustment, as this seems to be what the accountant has done.

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Replying to Loc:
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By Paul Crowley
10th May 2021 15:21

Does not make sense
IF no other issues (big if)
Then P & L tax should equal balance sheet tax
Capital allowances irrelevant
and no deferred tax UNLESS changed from 102 to 105

Could be other negative tax on balance sheet (VAT)
Could be tax penalties on P & L ( late filing)
So many coulds be

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Replying to Loc:
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By Paul Crowley
10th May 2021 15:24

Has the accountant just not bothered to change the accounts at all.
But changed the tax payable?

My guess
This is it

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Routemaster image
By tom123
10th May 2021 13:49

Deferred tax movement?
Who knows..

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Replying to tom123:
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By Paul Crowley
10th May 2021 13:50

Probably the accountant, not a random accountant.

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Replying to tom123:
RLI
By lionofludesch
10th May 2021 16:10

tom123 wrote:

Deferred tax movement?
Who knows..

Not on FRS 105.

If they've been done properly.

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By paul.benny
10th May 2021 14:00

If your accountant has given you an answer that you don't understand, ask them to explain it again. We can offer all sorts of possible explanations but they're only guesswork with the limited information in the OP.

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By I'msorryIhaven'taclue
10th May 2021 14:08

I get why you'd want to check for a mistake with that. You could ask for a copy of the tax return (the "CT600") if you don't already have one.

That'll give you the background calculation and liability. Have a look also at the notes to the accounts; there should be two notes ("Taxation" & "Creditors: amounts falling due within 1 year") containing corporation tax figures.

Armed with all that, you'd be in with a better chance of verifying your tax figures.

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Replying to I'msorryIhaven'taclue:
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By Loc
10th May 2021 14:21

I can see that there is an Annual Investment Allowance that has reduced the tax amount accordingly. So I can understand the difference.

I was just concerned that the tax amount in the P&L account was different. Is this normal, or should I ask accountant to review this?

Thanks

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Replying to Loc:
Maytuna
By DJKL
10th May 2021 14:26

Is there not a note showing how the tax in the I & E is made up, this will be within the notes to the accounts and may give you some ideas as to the reasons?

However best bet is as suggested,ask the accountants to provide a reconciliation between the accounts and the CT600.

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Replying to Loc:
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By I'msorryIhaven'taclue
10th May 2021 14:56

Well according to what you've posted that AIA hasn't reduced the tax charge, but has ostensibly increased it.

Ordinarily you'd expect the P&L taxation figure to be reduced by AIA. So suppose this was your first year trading (so a clean start, as no adjustments brought forward from previous year) and you'd made £100k of tax-adjusted profit which would ordinarily mean a £19k CT bill, then a £14k AIA would reduce the CT charge to £5k. The P&L tax figure would be £5k, as would the tax charge / liability in the notes.

That should be enough to clue you in that your accountant's explanation doesn't entirely cover the picture: as others have pointed out, it looks as though there are other charges and adjustments at play; or maybe you overpaid your CT last year or there is an o/d DLA somewhere in the mix. You need to obtain further information, as outlined earlier. (Late Edit: or, better still, do as DJKL has suggested and ask for a reconciliation).

Just a thought: do any of the tax figures have brackets around them?

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Replying to I'msorryIhaven'taclue:
Psycho
By Wilson Philips
10th May 2021 15:19

Explanation seems simple to me. AIA claim has significantly reduced the mainstream CT payable to HMRC - but the ‘saving’ reflected as a deferred tax charge in the P&L

All things being equal, the £14k AIA claim in your example would result in a £14k D/T charge - total P&L charge £19k.

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Replying to Wilson Philips:
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By I'msorryIhaven'taclue
10th May 2021 15:22

Well I'm awarding you ten bonus points for that timely intervention :)

By way of mitigation, we've been trying to persuade Loc to look up the Notes to the Accounts. Hopefully the Def. Tax would be on display there.

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Replying to I'msorryIhaven'taclue:
RLI
By lionofludesch
10th May 2021 16:12

I'msorryIhaven'taclue wrote:

Well I'm awarding you ten bonus points for that timely intervention :)

By way of mitigation, we've been trying to persuade Loc to look up the Notes to the Accounts. Hopefully the Def. Tax would be on display there.

Notes on FRS 105 accounts ?

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Replying to lionofludesch:
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By Paul Crowley
10th May 2021 16:17

Deferred Tax on 105 accounts?
Change of FRS irrelevant as all figures get restated

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Replying to lionofludesch:
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By I'msorryIhaven'taclue
10th May 2021 16:46

Well probably not if they do turn out to be FRS105. (Although you never know for the Shareholder's Copy).

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Replying to Loc:
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By Paul Crowley
10th May 2021 15:12

Ask to explain, not ask to review.
He already knows ( or should do)
Ask to review seems to imply YOU think it is wrong.
It is possible that the tax P & L is wrong. But that would also mean something else is wrong as well.
Accounts are double entry. There cannot be a single mistake, there must be two or more.

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ALISK
By atleastisoundknowledgable...
10th May 2021 15:15

I was going to say Deferred Tax until you said it was FRS105.

I think that the accountant has posted the CT excl any Capital Allowance adjustment into the accounts.

If (s)he hadn't mentioned Capital Allowances to you, I may have guessed at a prior year adjustment or under/over provision.

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Replying to atleastisoundknowledgable...:
Psycho
By Wilson Philips
10th May 2021 15:23

My guess - and it can only be a guess - is that the accountant has accounted for D/T even though using FRS105.

If s/he hasn’t, only s/he can provide the answer.

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Replying to Wilson Philips:
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By I'msorryIhaven'taclue
10th May 2021 15:28

Here that, Loc?

You need to look whether your accounts are prepared under FRS105 or FRS102; and while you're at it, have a gander at the note that's headed "Taxation" and tell us what's in there.

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Replying to I'msorryIhaven'taclue:
RLI
By lionofludesch
10th May 2021 16:56

I'msorryIhaven'taclue wrote:

Here that, Loc?

You need to look whether your accounts are prepared under FRS105 or FRS102; and while you're at it, have a gander at the note that's headed "Taxation" and tell us what's in there.

The fella's already said FRS 105.

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Replying to lionofludesch:
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By I'msorryIhaven'taclue
10th May 2021 21:52

You're right.. (she's left, I'm gone).

I missed that. My bad!

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Replying to I'msorryIhaven'taclue:
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By Hugo Fair
10th May 2021 22:20

Elvis has left the building!

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By Paul Crowley
10th May 2021 15:25

What does the balance sheet say?

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
10th May 2021 15:29

A talking balance sheet! Whatever next :)

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Replying to I'msorryIhaven'taclue:
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By Paul Crowley
10th May 2021 15:50

It probably says
'why have P&L and I not been amended for capital allowances? CT 600 and tax comp have.'

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
10th May 2021 22:12

Thank goodness for that. So long as Alexa's not involved.

Mrs ISIHA is now and again bothered by the neighbours' grandkids splashing about in their pool (she can be very busy sometimes, in spite of our family's combined efforts to keep her on the straight and narrow). And one day recently she reported to us one such naughty grandkiddy, Alexa, who was constantly having to be told just what to do. "Alexa, stop"; "Alexa, be quiet!". Ha! See where I'm goin' here?

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By frankfx
10th May 2021 15:47

Ask accountant for answer to your direct question, the 'detailed' trial balance should help.

This Q. has the hallmarks of a Boris Johnson Q & A on the wallpaper covering the cracks at Downing Street.

If the accountant is incapable of answering your qustion with sufficient detail and credibility , then hire one who can.

If I had prepared accounts for approval , with an ''apparent'' mis match I would have provided the explanation/ reconcilation to the client, prior to signing off.

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