corp tax

[Bigkahuna100]

Hi
Could anyone help me with a tax query?

Profits from my ltd company were £33,000 after expenses and wages. I paid £25k into my SIPP thinking this would reduce my Corp tax amount. I also took dividends of £28k from previous years profits. (corp tax already paid on these profits} However my accountant has calculated a corp tax bill of over £6k is this right?

[northernladuk]

First step is to go back to your accountant and get them to explain exactly how they've got to that figure. You can then ask them why they do what and you'll not only resolve this question but get a better idea of the company finances going forward.

[Lance]

sounds like the accountant hasn't included the SIPP payment as a business expense before calculating the corp tax.
Do you have FreeAgent? If so what does that say on the P&L report for the year?

[Bigkahuna100]

Hi Lance thats what i though as i expected the pension payment to negate most of the profits and pay personal tax on dividends thanks

[Bigkahuna100]

showing profit of 33k

[Lance]

showing profit of 33k

was the SIPP payment made in the correct year, and is it classed as a Pension(personal/stakeholder)?

[Bigkahuna100]

I was expecting a lowere figure as my pension payments would be a business expence and used to reduce corp tax



Dividends are not tax deductable on a company. Your SIPP contributions if employers rather than employees are. But you quote a profit of £33K after expenses so after the pension payments. Tax rate is 19% so £33K x 19% = £6.3K so that sounds about right.

Why are you expecting a lower figure?

[Bigkahuna100]

was the SIPP payment made in the correct year, and is it classed as a Pension(personal/stakeholder)?


yes same year and classed as a SIPP personal pension

[eek]

was the SIPP payment made in the correct year, and is it classed as a Pension(personal/stakeholder)?


yes same year and classed as a SIPP personal pension

The only person who can answer this question is your accountant so ask him.

Then ask him to explain in detail why he thinks the pension payment is not a legitimate business expense.

And then ask a different accountant (and in all likelihood start switching to them)

[Lance]

was the SIPP payment made in the correct year, and is it classed as a Pension(personal/stakeholder)?


yes same year and classed as a SIPP personal pension

something is wrong.
It should come under the P&L report as a "Staff Cost". Just above Employer NICs. Maybe the accountant has created a FreeAgent entry that is different to the out of the box "Pension (Personal/Stakeholder)". This is nominal code 350. But unless there's something you've omitted to tell us, the accountant has got it wrong, and so has FreeAgent. The only way I can see FreeAgent gets it wrong is if someone has been buggering around with the settings for those nominal codes (journals).