Company Year End / Divs etc

**ASB** · 9 April 2007, 15:19

1) The turnover applies to the year in prgoress. Whether it is paid or not is irrelevant. Whether it was invoiced is also largely irrelevant since work in progress should be accounted for if it is expected to be paid.

2) You pay CT on the profits earned. Paying a dividend make no difference to these, thus no change to the Ct. Depending on your own personal tax position then when the dividend is paid might make a difference.

**despot** · 9 April 2007, 15:29

The financial year accounting period is fixed at 5th April or thereabouts each year. I think the company accounting period that you refer to must be the annual return date for Companies House.

What my accountant does is to cut off the accounting period ending 31 March 200? and then use the cash flow into and out of the business account prior to that date as the basis for any P/L calculation.

I then take dividends from what is on the balance sheet for that accounting period. Any surplus monies are then subjected to CT.

It doesn't mean that it is right.

**MobileCheese** · 9 April 2007, 17:30

Originally posted by ASB

1) The turnover applies to the year in prgoress. Whether it is paid or not is irrelevant. Whether it was invoiced is also largely irrelevant since work in progress should be accounted for if it is expected to be paid.

2) You pay CT on the profits earned. Paying a dividend make no difference to these, thus no change to the Ct. Depending on your own personal tax position then when the dividend is paid might make a difference.

Cheers and before anyone asks I do have an accountant but just remebered it was year end and its playing on my mind now.

How do they define 'profit earned', what I have been doing is pay myself salary monthly then usually ever quarter paid myself a div. To work out the div I would minus from the business account future operating cost vat I owed, any corp tax from previous div payment, then take 19% off this and the remainder I paid as divs. So at the moment I have £xk set asside for corp tax is this all I need to pay, or is there a second set of corp tax I dont know about ??

sh*t

Thinking Im getting confused companies house says the following is due for me and when,

Accounting Reference Date: 30/04
Last Accounts Made Up To: (NO ACCOUNTS FILED)
Next Accounts Due: 27/02/2008
Last Return Made Up To:
Next Return Due: 25/05/2007

**philip@wellwoodhoyle** · 9 April 2007, 18:30

ASB is correct. Corporation tax profit is based on when the work was done, not when it was invoiced nor when it was paid for. Payment of dividends does not change whatever corporation tax is due on the profits. The company can have whatever tax/accounting year it choses - it is not 5 April nor any other fixed/arbitrary date - the directors have the choice and can choose whatever year end they want (although there are limitations as to how often it can be changed - extended only once every 5 years).

**Nixon Williams** · 9 April 2007, 18:34

Profits are calculated by taking all the expenses including salary from the income of the company. There are a few adjustments to take account of but basically that is it.

The amount left (hopefully there is some left!) is the profit. Corporation Tax is calculated at 20% (from 01/04/07, 19% before that). What is left can generally be paid as a dividend.

Remember that the level of dividends not not change the amount of Corporation Tax that is payable.

The tax is due 9 months + 1 day after the accounting period.

Accounts are due at Companies House 10 months (maybe slightly shorter on year 1) of the period end.

Alan

**MobileCheese** · 10 April 2007, 07:57

Originally posted by WHA

Payment of dividends does not change whatever corporation tax is due on the profits. .

So does that mean lets say for example I have £10k profit in my business account on my company year end. I therefore owe corp tax on that so £10k - 20% = £8k, then I decide a week later in my new company year I want to pay a dividend based on £8k do I pay corp tax again on that £8k even though I would of already set aside 20% of the £10k at my company year end ? Just trying to work out if I should bring the £ in my business account down to the bare minimum to avoid double application of corp tax at company year end/

Im confused

**PAG** · 10 April 2007, 16:49

Originally posted by MobileCheese

So does that mean lets say for example I have £10k profit in my business account on my company year end. I therefore owe corp tax on that so £10k - 20% = £8k, then I decide a week later in my new company year I want to pay a dividend based on £8k do I pay corp tax again on that £8k even though I would of already set aside 20% of the £10k at my company year end ? Just trying to work out if I should bring the £ in my business account down to the bare minimum to avoid double application of corp tax at company year end/

Im confused

CT is only paid once on the profit. so if you left 8K in your co a/c (not accounting for interest) and next year worked harder and made profit of 10k again CT is due on 10K only not 18K. hope this makes sense.

**ittony** · 10 April 2007, 22:06

Originally posted by WHA

ASB is correct. Corporation tax profit is based on when the work was done, not when it was invoiced nor when it was paid for.

Hi there. I would be very grateful if you could please expand a little on how how this rule works in practice. If I invoice a client for a job I've just finished, the majority of which was done in the tax year just ended, do you mean that I have to split the invoice into two components for before and after the 5th April? Even if the job was done on a fixed-cost basis and I wouldn't be making the development dates transparent to the client? And having subcontracted some of the development, do I need to find out how my supplier's time was split over the two tax years? And what happens if I bill a client for x days work this year but most of the development was done on a speculative basis in the previous tax year?

Thanks!

**despot** · 10 April 2007, 22:16

If you are doing a fixed price job for some deliverables, then you can invoice on the deliverables (not recommended as you will probably never get paid given the track record of most clients for working to a time schedule) or you can invoice on the basis that you will deliver the agreed deliverables but bill for the fixed price cost based on your estimated effort (e.g. time) to do the job.

So Job X has 3 deliverables and will require 80 man days of your best employee (e.g. you) over a 4 month time period (say).

You bill for 20 man days of effort every calendar month. At least, that is the way I do it!! Your contract wording will focus on the deliverables and the fixed price component which can only be computed based on your estimate man day effort x day rate!

Not sure if that answers your question?

Company Year End / Divs etc