Correcting an accounting error

[Olly]

In the 2010-11 tax year I accidentally took a directors loan of £2478.92 that was not repaid before the tax period end. It was cleared within a few months of the next tax period 2011-12 for which I'm trying to prepare the CT600 return for.

I'm not too sure how, but my ex accountants calculated the value of the loan incorrectly as £2599 and this is recorded on the CT600A form that was submitted.

So, I hope you can help please. What should I do about the discrepancy and is any kind of special form filling needed to record that the loan was repaid?

Thanks

[northernladuk]

A directors loan has to be paid back within 9 months of the end of an accounting period so as long as you pay it back before then there is nothing to add as long as it was accounted for correctly in the previous period I believe.

Best option is to speak to your accountant though.

[Jessica@WhiteFieldTax]

There's no special form filling on repaying a loan, generally tax follows the accounting.

If S455 tax (the 25% on loans outstanding 9 months after end of financial year) is due or,repayable, then this is dealt with via the CT600 submission.

The discrepancy in the loan amount could be as your ex accountant had something else added on there?

It's a £120 difference which looks like £100 + vat - did they bill you separately for personal tax return, and you,pay it via the company? A wild guess...

[Olly]

Thanks for the reply Jessica, all was repaid within a few months. I can't see where the discrepancy has come from but this one and few others I need to "clean up" some how.

The next one is more maybe more serious. On the CT600 box 1 "Total turnover from trade or profession" the value submitted last year is 3 or 4K short of the actual invoiced/received.

Should this be the total invoiced in the period (a bit like VAT) or the total that was actually paid?

How should I correct the error? Just hike this year's by the difference?

On a contract through NES IT, they provided automated invoicing and pay weekly insurance. This meant the invoices they generated on my behalf were for my fee for the month minus the insurance. I've represented this in the accounts as a separate insurance expense and increase the turnover by the cost of the insurance, does that sound right?

Thanks

[Jessica@WhiteFieldTax]

The turnover for the CT600 should be per the business accounts, which in turn should be invoiced adjusted for - if any - work in progress.

I personally wouldn't worry about correcting anything here, the turnover figure is statistical only and doesn't effect the tax charge.

Re grossing up turnover for insurance, yes that sounds sensible.

[Olly]

Thanks again...

The turnover for the CT600 should be per the business accounts, which in turn should be invoiced adjusted for - if any - work in progress.

Ok, so does that mean that the turnover should add up to all the credits to the business bank account during the period plus any unpaid invoices (work in progress) plus the cost of insurance that was deducted at source by the agency?

I personally wouldn't worry about correcting anything here, the turnover figure is statistical only and doesn't effect the tax charge.

The turnover figure is the same as the "Fees receivable" amount that was used in the tax calculation and therefore not enough tax was paid so I'll need to correct that some how.

I guess no corp tax is due on total VAT charged but is due on the difference between the flat rate and the 20% standard rate? If so then I might have actually overpaid CT last year.

Re grossing up turnover for insurance, yes that sounds sensible.

Tidy

[Olly]

The turnover for the CT600 should be per the business accounts, which in turn should be invoiced adjusted for - if any - work in progress.

Doh....you hit the nail on the head. The discrepancy is down to WIP carried forward from 2010-11.

I forgot that was required...handy thing is for 2012 I invoiced on 30 April so no WIP figure to capture this time, right?

P.S. Should my Ltd pay corp tax on the HMRC incentive for web filling? I got £175 back at the beginning of 2012

[Jessica@WhiteFieldTax]

The filing incentive is tax free - it needs to show in your business accounts, but then add back on CT computation.

Re turnover and wip. Technically at the end of the year if its invoiced and unpaid its a debtor, if its done and not invoiced its WIP. You need to bring a "fair value" of WIP in to your turnover, so when you said you invoiced on 30 April, if any of that related to work done before the year end, that pre year end proportion needs to come in.

Re VAT (your question two posts back) - I'm assuming you are on flat rate from what you said. In which case the normal basis of working out turnover would be gross receipts including vat, less the flat rate payments made or due. Debtors and WIP could come in at net figure, thus deferring tax on the Flat Rate bonus, or at gross less flat rate due. Balances out next year.

HTH