Calculating Corporation Tax (Penalty - Non deductable expense for Tax purpose)

[a1979raj]

Hello,

This is my first ever post here so please excuse (if) any mistake(s) and advise me on how to correct it.

One thing that is confusing me from my CT600 Calculations (half way through) is calculation of Corporation tax on Non Deductable Expense.

I have used lower amount for sake of simplicity and please do not suggest that for such low income there may not be any tax due.

If my turnover is £1000.00 and the only expense I have is £100.00 VAT Penalty.
Do I pay corporation tax on £1000.00 or £1100.00?

If I am paying Corporation tax on 1000.00 than which category my 100.00 VAT penalty will go under (with reference to CT600 calculations)?
I know I have to add this to Non Deductable Section as well. But currently as I am completing this, my taxable profit is coming to £1100 in my CT calculation(s) which is greater than my turn over. Is this correct?

Kind Regards and Thank you all in advance.

[aoxomoxoa]

What does your accountant say?

[northernladuk]

What does your accountant say?

I am guessing with a VAT penalty he hasn't got one and still hasn't learned his lesson......

[TheCyclingProgrammer]

Hello,

This is my first ever post here so please excuse (if) any mistake(s) and advise me on how to correct it.

One thing that is confusing me from my CT600 Calculations (half way through) is calculation of Corporation tax on Non Deductable Expense.

I have used lower amount for sake of simplicity and please do not suggest that for such low income there may not be any tax due.

If my turnover is £1000.00 and the only expense I have is £100.00 VAT Penalty.
Do I pay corporation tax on £1000.00 or £1100.00?

£1000. Gross profit = £900 (turnover less expense). Taxable profit = Gross profit + add back any non-allowable expenses = £1000 (this is obviously simplified - there are other things that can impact your tax calculation).

If I am paying Corporation tax on 1000.00 than which category my 100.00 VAT penalty will go under (with reference to CT600 calculations)?
I know I have to add this to Non Deductable Section as well. But currently as I am completing this, my taxable profit is coming to £1100 in my CT calculation(s) which is greater than my turn over. Is this correct?

Kind Regards and Thank you all in advance.

I can't say for certain as my accountant always does my CT return for me, but I would have thought you'd simply exclude the £100 entirely when entering your deductions into the CT600 calculator. It's an expense as far as your company accounts are concerned but for the purposes of the CT600 it just doesn't figure (i.e. the expense comes out of your post-tax profits).

[Scruff]

I would suggest, most strongly, that you engage the professional services of a properly qualified Accountant.

As a first time poster, please don't take offence, but this type of question is often asked, and sometimes a rude answer is forthcoming. Most of us have been around the block and employ an Accountant (I am an accountant, work as an IT Consultant, but pay an Accountant to do my accounting...).

[VectraMan]

The question is whether your CT is based on £1000 or £900, and it's £1000. I had the same with a £100 CT penalty, but unfortunately I can't remember what I did. I do remember I was using the paper form, which is considerably easier and doesn't refuse to let you continue because something doesn't add up without telling you what's meant to add up.

If your taxable profit is coming out at £1100 that suggests you're putting in £1000 where you should be putting in £900 - i.e. £900 is the profit from the balance sheet/P&L statement and you add on the £100 non deductable expense.

Don't let the "ask your accountant" trolls bother you.

[northernladuk]

The question is whether your CT is based on £1000 or £900, and it's £1000. I had the same with a £100 CT penalty, but unfortunately I can't remember what I did. I do remember I was using the paper form, which is considerably easier and doesn't refuse to let you continue because something doesn't add up without telling you what's meant to add up.

If your taxable profit is coming out at £1100 that suggests you're putting in £1000 where you should be putting in £900 - i.e. £900 is the profit from the balance sheet/P&L statement and you add on the £100 non deductable expense.

Don't let the "ask your accountant" trolls bother you.

That's right, take the advice from people that can't remember what they did. Much more useful

[VectraMan]

That's right, take the advice from people that can't remember what they did. Much more useful

Whereas the advice from somebody who hands over £1500 a year to have someone else do it for them is invaluable. ;-)

This forum is called "Accounting / Legal". It seems reasonable therefore that people should be able to ask accounting / legal questions.

[xoggoth]

This forum is called "Accounting / Legal". It seems reasonable therefore that people should be able to ask accounting / legal questions

Quite agree. If people are only going to say "ask an accountant" what's the point? In any case, said it before, but anyone who totally trusts an accountant and does not attempt to understand enough to check his accounts are reasonably correct is an idiot. Some accountants are utter crap.

Anyway, in the accounts to companies house, you count penalties, fines etc as an expense and deduct from profit as any other. However, they are not allowable as corporation tax deductions, so you add the amount back to the profit for CT600.

Your taxable profit can't be greater than turnover! Presumably you have not deducted this fine when arriving at your original profit. Sounds like your profit (in accounts) should be £900. Add back in CT500 to get £1000 for tax purposes.

[northernladuk]

Whereas the advice from somebody who hands over £1500 a year to have someone else do it for them is invaluable. ;-)

This forum is called "Accounting / Legal". It seems reasonable therefore that people should be able to ask accounting / legal questions.

True enough, you got me there.... I could argue the name of the forum isn't "Do my accounting for free for me/Legal" but you make a good point. I still think to someone that already has a VAT fine AND thinks his taxable profit is greater than his turnover might be better off getting a professional. This is more than likely going to be the tip of the iceberg... but anyway, your point stands sir.