Corporation Tax, glad to be doing our bit for the country....

[confounded]

We are a small company who are keeping our head above water in a tough time, we will make a living this year but things need to improve next year to justify the hours that go into running your own business.

We are finalising our last year accounts, by my calculations we face a £40k corporation tax bill shortly.

I read this and despair, we face 1/4 of the tax bill one of our esteemed MP's family business faces, the only difference is their revenue for the year was £2.1Bn with profit of £65million......

The irony of it is that she is to head up a challenge to big companies who do just the same.....


Margaret Hodge's family company pays just 0.01pc tax on £2.1bn of business generated in the UK - Telegraph

 

[confounded]

Just done a few sums and worked out our accountant is going to have to earn their fee this year, they need to get us down to £123 CT to match.....

 

[solarsavings]

Funny, I was only yesterday telling my accountant he must be kidding when he told me how much we have to pay:sad_smile: I'd love to know how the ---- they get away with it and we have to pay for it.

 

[sedgy34]

I'm amazed change your accountant you should go and get a Mercedes crew cab it's got seats it can carry a ton and it will come off your corporation tax bill

 

[infinity]

go spend £40k on tools!!

 

[confounded]

I'm amazed change your accountant you should go and get a Mercedes crew cab it's got seats it can carry a ton and it will come off your corporation tax bill

The £40k is the corporation tax due on the profit we made, it is not the profit that can be spent to eliminate all CT. Surely if we bought a van it would only save £4k of corporation tax even if the whole van cost of £20k could be offset (and I don't think you can offset the full van cost all in the same financial year)? Also we would then have spent £16k on a flash van we didn't need.

We have sacked the first accountant and hope that our new one will be able to work some Magic on my rough calcs, doubt they will be able to get it down to £123 though as per the big boys.

 

[finchy]

The trouble is these large companies make their tax affairs so complex it's easier to chase small businesses. Not like we can share our profits with our Swedish subsidiary, by the way of royalties. Either way CT or Personal tax they will get the small chaps first...

 

[sedgy34]

Was your net profit around £76k whilst that was rolling in surely tax was on the back of your mind!

 

[confounded]

Was your net profit around £76k whilst that was rolling in surely tax was on the back of your mind!

We pay dividends out of our profits which is why they were left so high, so really a lot of it is only what we would have had to pay in NI and income tax. Would be nice to be getting it down a bit though.

 

[sedgy34]

Get some receipts mate for tools clothing stationery vehicle advertising you know what I mean mate you will soon only owe £125 lol

 

[Graeme Harrold]

Got a £3.5k bill to pay, fortunately Ill get it back next year as Ive made a monumental loss this year......

 

[confounded]

Funny, I was only yesterday telling my accountant he must be kidding when he told me how much we have to pay:sad_smile: I'd love to know how the ---- they get away with it and we have to pay for it.

Well our corporation tax liability is even higher than my rough calculations.

One of the ideas that our accountant came up with was to put a provision for future warranty claims in and offset that figure against our CT liability. Has anyone else done this or looked at this for an option?

 

[Gavin A]

now that sounds like a good plan.

I'd appreciate it if you could feedback if the accountant says that's ok, before I discuss it with my accountant.

 

[confounded]

now that sounds like a good plan.

I'd appreciate it if you could feedback if the accountant says that's ok, before I discuss it with my accountant.

It was our accountant that suggested it and it seemed a very good option to us, just wondering what other people thought and what figures they were using. She felt between £300-£500 per job was justifiable.

 

[telectrix]

remember that charitable donations can be offset against tax. my charity is Community Assistance for Shire Horses.

now, you might not be able to fit all that on the payee line, so just use the initials: CASH. :ciappa:

 

[Gavin A]

It was our accountant that suggested it and it seemed a very good option to us, just wondering what other people thought and what figures they were using. She felt between £300-£500 per job was justifiable.

I'd think that'd be hard to justify at those figures. I doubt you should really even be accounting for the costs of one call out per customer, as I'd certainly be hoping that the average was far less than one call out per customer.

something more like £75-100 per customer would seem a bit more realistic and less likely to be challenged to me, unless you also warranty the equipment yourself on top of the manufacturers warranty.

 

[confounded]

Hard to know what to go for, but we are a small company where both directors are on the tools at times like these, we are expensive ;-).

Scaffolding and a 1 in 3 warranty claim over 5 years could see us at the lower end of what she suggested.

 

[Gavin A]

most repair work is doable off a scaf tower if you have one.

but yes, I'd not factored that cost in, so maybe a bit more, but £300-500 per job seems exceptionally high to me, and I'd worry about being able to justify it if HMRC queries it. If you can justify it, then fair enough.

 

[BruceB]

Be interested to know what others go for as a provision in the accounts. No doubt HMRC will challenge one of us. I have just put in 2% of cost of sales to cover future warranty claims.

 

[Worcester]

There's no issue with CT, if you pay it that way you save the NIC when you take it out as dividends, so you're 13.8% personally better off

And yes we put a small % in as liability for future warranty claims.

 

[confounded]

There's no issue with CT, if you pay it that way you save the NIC when you take it out as dividends, so you're 13.8% personally better off

And yes we put a small % in as liability for future warranty claims.

Yes, it is essentially deferred income tax/NI so we are not too aggrieved by paying it, just a big lump some (that we saved for), and as you say there is a benefit to doing it this way.