PTP Tax Tip No 40 - Minimising the tax bill for a company with a 30 September year end

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Q: My client company made taxable profits of 32,000 in the year to 31 September and paid a dividend of 10,000 on 9 January 2006. The taxable profits included a chargeable gain of 20,000 realised in February 2006. To calculate the corporation tax I have taken 16,000 of the profits as falling before 1 April 2006 and the other 16,000 after 31 March 2006. This gives 26,000 at 19% and the other 6,000 at an average rate of 16.33% so the total tax bill is 5,920. Can I allocate the chargeable gain entirely to the first notional period which seems to have a lower average rate and thereby save a bit of tax for my client?

A: Yes and no! You have correctly apportioned the profit between the two notional accounting periods either side of 31 March 2006 and applied the starting rate and NCD rate to the fi...

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