Upcoming quiet accounting period

[Scruff]

You can put in a salary/bonus accrual in the current years financial statements if you want.

Please can you explain this to me?

I would have thought that the matching principle comes into play (unless you are Tesco)?

[Goingitalone]

Hi all, thanks for the responses so far. The idea of extending the end of year sounded good, however I had a further question on the corp tax front? If I extend my year end by say six months from April 5th which is my current accounting period end I would then have to file two CT600s for the two accounting periods.
Am I right in thinking that the first CT600 covering till April would contain all of the turnover and therefore generate the same corp tax payable and then the second one from April till October would include the subsequent director's salary which would fall in the 16/17 personal tax year but be counting against zero turnover and generate a loss? Sorry this is probably a daft question, my CT600 have always been fairly easy up till now as they run in line with the tax year.

[Dan @ SG Accounting]

Only one set of accounts would be prepared so the turnover and profit would be time apportioned rather than matched to the 12 month or subsequent 6 month period. So second ct600 (Apr to oct) would include 6/18th or 1/3 of the total turnover and profit subject to tax.

[northernladuk]

I thought changing year end was something to be done very infrequently and wasn't really a tool to use to just avoid some tax in a one off situation?

[john@UKCA]

Matching Principle

Please can you explain this to me?

I would have thought that the matching principle comes into play (unless you are Tesco)?

This is the matching principle- after 11 months of your trading year you decide you had a fairly good year and would like to pay a bonus based on the results so you draw up a Board Minute to that effect stating the amount on the bonus and the day it is to be paid which has to be within 9 months of year end for tax relief to be obtained in the current year end accounts.

You then provide for a bonus accrual in the year end accounts which is cleared when the bonus is paid.

[Alan @ BroomeAffinity]

This is the matching principle- after 11 months of your trading year you decide you had a fairly good year and would like to pay a bonus based on the results so you draw up a Board Minute to that effect stating the amount on the bonus and the day it is to be paid which has to be within 9 months of year end for tax relief to be obtained in the current year end accounts.

You then provide for a bonus accrual in the year end accounts which is cleared when the bonus is paid.

But that's not reflective of the facts. The op clearly stated its the salary for the following year, not a bonus for the current year.

[Scruff]

Tish. IMHO that's not going to work. Bonus is just salary. Dividends are the reward for entrepreneurial risk.

[john@UKCA]

*BIM46565 - Specific deductions: provisions: allowability for tax: provisions affected by specific statutory timing rules
Consider whether a provision includes elements that are affected by specific tax rules. For example S1288 Corporation Tax Act 2009 (CTA 2009) and S36 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) provide that in computing taxable profits no deduction may be made for the remuneration of employees unless that remuneration is paid (as defined for PAYE purposes) during the accounting period or within nine months of the end of the accounting period. This means that if a provision includes an element in respect of employee's remuneration, that element must be disallowed to the extent that the remuneration is not 'paid' within nine months of the end of the accounting period.

[Alan @ BroomeAffinity]

That explains why a retrospective bonus is allowable. It does not affect salary paid FOR one year being claimed in the previous one.

[Dan @ SG Accounting]

I thought changing year end was something to be done very infrequently and wasn't really a tool to use to just avoid some tax in a one off situation?

You can shorten your year end as much as you like but only extend it once every 5 years so you wouldn't want it to become a habit in tax planning.