Statutory Maternity Pay - Advance Funding

[MJR]

I have my own limited company of which I am the sole director and employee of. I applied for advance funding from HMRC as earnings are below tax and NI threshold. Please can anyone advise if this advance funding for SMP forms part of my turnover and is subject to Corporation Tax. Thanks

[Clare@InTouch]

No, SMP is not part of your taxable turnover.

[northernladuk]

I have my own limited company of which I am the sole director and employee of. I applied for advance funding from HMRC as earnings are below tax and NI threshold. Please can anyone advise if this advance funding for SMP forms part of my turnover and is subject to Corporation Tax. Thanks

Your accountant can....

[Martin at NixonWilliams]

I have my own limited company of which I am the sole director and employee of. I applied for advance funding from HMRC as earnings are below tax and NI threshold. Please can anyone advise if this advance funding for SMP forms part of my turnover and is subject to Corporation Tax. Thanks

From an accounting point of view the SMP is offset with the salary paid to the employee, as such it reduces the salary expense in the profit and loss account - Although it is not turnover, it will result in additional corporation tax being paid.

[MJR]

Thank you for the comments. So, it isn't included within the turnover. The majority of the salary for that accounting period was prior to mat leave and the mat pay wasn't actually paid out until after the accounting year end, although the company received the advance funding for 13/14 and 14/15 in one lump sum during 13/14.
How does it result in additional CT being due? Thank you.

[Martin at NixonWilliams]

Thank you for the comments. So, it isn't included within the turnover. The majority of the salary for that accounting period was prior to mat leave and the mat pay wasn't actually paid out until after the accounting year end, although the company received the advance funding for 13/14 and 14/15 in one lump sum during 13/14.
How does it result in additional CT being due? Thank you.

Because the maternity pay reduces the salary in the profit and loss account.

For example, if the standard salary was £30,000 per year and the maternity pay was £5,000, the amount included as salary in the profit and loss account is £25,000. The profit before tax is therefore higher and so additional CT will be due.

For the purpose of preparing the accounts the funding should be matched to the period it relates irrespective of when it has been received.

I hope this helps.

Martin