How to calculate Corporation Tax for my last period which is across CT rate change?

[sy8111]

Hi,

We know on 01/04/2011, small business CT change from 21% to 20%. In my case, my accounting period ends on 05/04/2011. I have revenue and expenses before 01/04, but no revenue, only expenses during 01/04 - 05/04.

Say my revenue and expense before 01/04 are Rb and Eb, and expense after 01/04 is Ea. How do I calculate CT? Is it like below?

(Rb-Eb) x 21%, or

(Rb-Eb-Ea) x 21% ?

Thanks all

[prozak]

Right.

So I believe I know what you are asking. Is it worth it for 4 days at 20%?

So for 361 days of the year you were at 21%
and 4 days of the year you were at 20%.


So your effective rate is 20.99%

[Clare@InTouch]

You apportion the profit over the total period, and then part is taxed at 20% and part at 21% on a daily basis. It makes no difference when the income came in (unless there's a dormant period, say before you started to trade).

[KittyCat]

You apportion the profit over the total period, and then part is taxed at 20% and part at 21% on a daily basis. It makes no difference when the income came in (unless there's a dormant period, say before you started to trade).

So if the company was dormant until after 01/04/2011 CT will be all at 20%?

[Clare@InTouch]

So if the company was dormant until after 01/04/2011 CT will be all at 20%?

Effectively yes, because HMRC deem it to be 'not within the charge for CT' for the dormant period therefore your CT return would only cover the active period.

What does dormant for Corporation Tax mean

Dormant is a term that HMRC and Companies House use for a company or organisation that is not active, trading or carrying on business activity. But HMRC and Companies House use the term dormant in slightly different ways.
For Corporation Tax purposes, HMRC views a dormant company as a company that's not active, not liable for Corporation Tax or not within the charge to Corporation Tax.

HM Revenue & Customs: Trading and non-trading for Corporation Tax explained

[KittyCat]

Effectively yes, because HMRC deem it to be 'not within the charge for CT' for the dormant period therefore your CT return would only cover the active period.

What does dormant for Corporation Tax mean

Dormant is a term that HMRC and Companies House use for a company or organisation that is not active, trading or carrying on business activity. But HMRC and Companies House use the term dormant in slightly different ways.
For Corporation Tax purposes, HMRC views a dormant company as a company that's not active, not liable for Corporation Tax or not within the charge to Corporation Tax.

HM Revenue & Customs: Trading and non-trading for Corporation Tax explained

Thanks

[sy8111]

Thanks for your quick reply. This makes sense. When is normally the accrual time to record CT expense?

You apportion the profit over the total period, and then part is taxed at 20% and part at 21% on a daily basis. It makes no difference when the income came in (unless there's a dormant period, say before you started to trade).

[Clare@InTouch]

Thanks for your quick reply. This makes sense. When is normally the accrual time to record CT expense?

If an expense happens during the year and it relates to the year then it's included. If you're adding in accruals, meaning expenses paid after the year end but relating to the year, there's no set limit I suppose. It just needs to clearly relate to the year, something like an accounts fee for the accounts in question for example.