First Year Accounts with huge corp tax

[muralijv]

thanks for your comments guys. Yes I worked like a dog for the first year due to some personal reasons ( with out a break). my profit is shown as 52k turn over of 87k. this is what communicated by the accountant.I have not claimed for anything else other than transport , account fees ETC. I was trying to be honest.
so I can claim for the below.

1. Mobile fone.
2. Home Office Rent ( any idea how much can I claim).
3. will include wife as a parter and pay her some dividends.

Thanks
Murali

[Wanderer]

my profit is shown as 52k turn over of 87k. this is what communicated by the accountant.I have not claimed for anything else other than transport , account fees ETC. I was trying to be honest.
so I can claim for the below.

1. Mobile fone.
2. Home Office Rent ( any idea how much can I claim).
3. will include wife as a parter and pay her some dividends.

Ask your account about 1 and 2, there are special rules. The total amount won't be much though.

3. Yes, you can make your wife a shareholder and pay her dividends. This is a good way to avoid hitting the higher rate income tax bracket but it's no use if your wife already earns >40k/year. The ideal situation is when your wife has no other income.

Lots of people pay their wives a salary if she does work for the company like book keeping etc. £4,000 is suggested but see what your accountant says.

It's vital that you get professional advice on this, ask your accountant about making your wife a shareholder and what the correct shareholding should be given your company profit (current and future) and what your wife's income is.

Also ask them to explain why you are paying £15k CT on profits of £52k - VT it should be 20% of the profits.

[Clare@InTouch]

thanks for your comments guys. Yes I worked like a dog for the first year due to some personal reasons ( with out a break). my profit is shown as 52k turn over of 87k. this is what communicated by the accountant.I have not claimed for anything else other than transport , account fees ETC. I was trying to be honest.
so I can claim for the below.

1. Mobile fone.
2. Home Office Rent ( any idea how much can I claim).
3. will include wife as a parter and pay her some dividends.

Thanks
Murali

You can claim for the 'phone as long as the contract is in the company name. You can have one 'phone per employee.

The HMRC use of home guideline is £156 pa, although you can claim more if you can justify it, for example if you work from home a lot.

Dividends won't reduce your company tax, but they will reduce your personal tax bill if you're taking more than c£30k. To reduce your CT you should look more into paying her a small wage IF she does your company admin. Note that it's only worthwhile if she doesn't earn elsewhere.

Other things to consider:

Childcare up to £55 a week for a basic rate taxpayer (rate is based on wages, NOT inc. dividends). Must be paid direct to the provider, cannot be reclaimed on expenses;
Pension contributions up to £50k (certain rules apply);
Eye test if you use a computer;
Computer equipment & consumables;
Professional subscriptions;
Insurance;
Staff annual event, usually a Christmas party;
Travel, subsistence, mileage;
Books & technical manuals;
Training - it's an odd one though regarding what's allowed, so check with your accountant;
Postage & stationery;
A few I've no doubt forgotten right now.

The general rule to follow is that, with a few exceptions, you can claim anything that's necessary for you to buy in order to run your business. If there's a personal benefit, such as clothing or gym membership, then there will usually be personal tax implications.

If you're ever not sure if you can claim something just email your accountant. I'm sure they'd rather you email them to check than miss out on something.

[tractor]

..

I'm sure it will be obvious now, you are well into this tax year and should be planning before the year ends and you are stuck with a potentially compounded problem.

[MarillionFan]

thanks for your comments guys. Yes I worked like a dog for the first year due to some personal reasons ( with out a break). my profit is shown as 52k turn over of 87k. this is what communicated by the accountant.I have not claimed for anything else other than transport , account fees ETC. I was trying to be honest.
so I can claim for the below.

1. Mobile fone.
2. Home Office Rent ( any idea how much can I claim).
3. will include wife as a parter and pay her some dividends.

Thanks
Murali

Those numbers don't stack up then. You mentioned that you have been asked to pay £15k corporation tax. This is paid on the profit, which you say is £52k on a turn over of 87k. You also say that you have only claimed for a few expenses. Is your turnover 87k including VAT or excluding VAT? Sounds like including based on previous posts.

What is the breakdown of your accounts?

[Sockpuppet]

Those numbers don't stack up then. You mentioned that you have been asked to pay £15k corporation tax. This is paid on the profit, which you say is £52k on a turn over of 87k. You also say that you have only claimed for a few expenses. Is your turnover 87k including VAT or excluding VAT? Sounds like including based on previous posts.

What is the breakdown of your accounts?

I get 87k inc vat.

Ex vat that is £72,500

20% of that is £14,500


I suggest something very wrong with your figures is happening.

[Clare@InTouch]

I get 87k inc vat.

Ex vat that is £72,500

20% of that is £14,500


I suggest something very wrong with your figures is happening.

Unless he's assuming dividends are tax deductible.....

[Bunk]

Could be 87k turnover, 10k salary, 2k accountant and other expenses. That leaves 75k profit giving 15.75k corp tax. Or some variation of those figures. It sounds like it's in roughly the right ballpark.

Edit: And it's certainly not a huge bill considering if 87k was salary you'd be paying just under 30k in tax and NI payments.

[Jeebo72]

Let's hope the OP hasn't spent it!

I suspect that's the problem. 15k is not high for contractors!

[psychocandy]

Oops. Hope OP hasnt spent it all....

Seems a bit of a strange thing to do though - go all year and then wait to see how much your tax bill is going to be and then pay it?