Quick Corporation Tax Liability Question

[bathingape]

Hoping someone can clear this up. Just discussing this earlier today at client co with fellow contractors. I think we're all on about the same thing, but we're wording it differently!

Basically, if I have sales of £10,000 and I have no expenses, then corporation tax is paid on £10,000....correct?

If I have sales of £10,000, and expenses are £5,000 - whether that's a computer, company pension contribution, or anything else - then corporation tax is paid on £5,000? Or can you only claim 20% of the expense (£1,000) - therefore leaving you to pay CT on £9,000?

Just thought I'd post it up here as I think we've all had conflicting/confusing explanations from our accountants for something relatively simple.

[LondonManc]

Profit = Revenue - Costs

You pay corporation tax on profits.

If your accountant cannot explain that, it's time for a new accountant.

[Neil@Intouch]

Corporation tax

Yes that's correct. You would pay corporation tax based on the net profit. Your sales would exclusive of VAT that you would pay corporation tax on. If you are on the flat rate VAT scheme, this would be the gross invoice less flat rate VAT payable to HMRC.

Is there no salary in place from the company to yourself?

If your expenses were £5,000 with turnover of £10,000, you would pay CT on £5,000, so £1,000 of CT and the remaining £4,000 is what's available for you take out of the company as a dividend.

[northernladuk]

A bunch of contractors can't explain this between them is very worrying.

The fact that no one can use Google to find the basics is even worse.

http://www.contractoruk.com/limited_...tor_taxes.html

[jmo21]

Hoping someone can clear this up. Just discussing this earlier today at client co with fellow contractors. I think we're all on about the same thing, but we're wording it differently!

Basically, if I have sales of £10,000 and I have no expenses, then corporation tax is paid on £10,000....correct?

If I have sales of £10,000, and expenses are £5,000 - whether that's a computer, company pension contribution, or anything else - then corporation tax is paid on £5,000? Or can you only claim 20% of the expense (£1,000) - therefore leaving you to pay CT on £9,000?

Just thought I'd post it up here as I think we've all had conflicting/confusing explanations from our accountants for something relatively simple.

that is both incredible, and yet not surprising.

Hope you're not the muppet in that conversation.

[northernladuk]

that is both incredible, and yet not surprising.

Hope you're not the muppet in that conversation.

(S)He is in this one

[bathingape]

(S)He is in this one

I was actually right in this one

I was right all along...I just happened to get sucked into their convo and made me doubt myself!