Originally posted by ittony
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Reply to: Company Year End / Divs etc
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Previously on "Company Year End / Divs etc"
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Originally posted by WHAYou don't need to change the way you invoice nor the way your suppliers invoice you. What you do need to do is make adjustments (journal entries) in your final accounts (and therefore your corporation tax), to make sure that your income and expenses are put into the tax years that they fairly relate to, not the tax years in which the invoices were raised or that the monies were paid.
For example, if you have been doing a contract for say 8 weeks, 7 weeks of which are in 2006/7 and the eight (and invoice date) is in 2007/8, then you continue to invoice as previously, but 7/8ths (or a more accurate figure if you have accurate time/costing records) needs to go in your 2006/7 accounts and be taxed in the 2006/7 tax year.
As to your suppliers, you don't need to know when they did the work - if you are bringing in 7/8th of your income, then makes sense to bring in 7/8th of your suppliers bill (i.e. the "matching" concept) or again, you can be more accurate if you have more accurate/relevant way of matching your costs against revenue.
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You don't need to change the way you invoice nor the way your suppliers invoice you. What you do need to do is make adjustments (journal entries) in your final accounts (and therefore your corporation tax), to make sure that your income and expenses are put into the tax years that they fairly relate to, not the tax years in which the invoices were raised or that the monies were paid.
For example, if you have been doing a contract for say 8 weeks, 7 weeks of which are in 2006/7 and the eight (and invoice date) is in 2007/8, then you continue to invoice as previously, but 7/8ths (or a more accurate figure if you have accurate time/costing records) needs to go in your 2006/7 accounts and be taxed in the 2006/7 tax year.
As to your suppliers, you don't need to know when they did the work - if you are bringing in 7/8th of your income, then makes sense to bring in 7/8th of your suppliers bill (i.e. the "matching" concept) or again, you can be more accurate if you have more accurate/relevant way of matching your costs against revenue.
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If you are doing a fixed price job for some deliverables, then you can invoice on the deliverables (not recommended as you will probably never get paid given the track record of most clients for working to a time schedule) or you can invoice on the basis that you will deliver the agreed deliverables but bill for the fixed price cost based on your estimated effort (e.g. time) to do the job.
So Job X has 3 deliverables and will require 80 man days of your best employee (e.g. you) over a 4 month time period (say).
You bill for 20 man days of effort every calendar month. At least, that is the way I do it!! Your contract wording will focus on the deliverables and the fixed price component which can only be computed based on your estimate man day effort x day rate!
Not sure if that answers your question?Last edited by despot; 10 April 2007, 22:18.
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Originally posted by WHAASB is correct. Corporation tax profit is based on when the work was done, not when it was invoiced nor when it was paid for.
Thanks!
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Originally posted by MobileCheeseSo does that mean lets say for example I have £10k profit in my business account on my company year end. I therefore owe corp tax on that so £10k - 20% = £8k, then I decide a week later in my new company year I want to pay a dividend based on £8k do I pay corp tax again on that £8k even though I would of already set aside 20% of the £10k at my company year end ? Just trying to work out if I should bring the £ in my business account down to the bare minimum to avoid double application of corp tax at company year end/
Im confused
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Originally posted by WHAPayment of dividends does not change whatever corporation tax is due on the profits. .
Im confused
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Profits are calculated by taking all the expenses including salary from the income of the company. There are a few adjustments to take account of but basically that is it.
The amount left (hopefully there is some left!) is the profit. Corporation Tax is calculated at 20% (from 01/04/07, 19% before that). What is left can generally be paid as a dividend.
Remember that the level of dividends not not change the amount of Corporation Tax that is payable.
The tax is due 9 months + 1 day after the accounting period.
Accounts are due at Companies House 10 months (maybe slightly shorter on year 1) of the period end.
Alan
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ASB is correct. Corporation tax profit is based on when the work was done, not when it was invoiced nor when it was paid for. Payment of dividends does not change whatever corporation tax is due on the profits. The company can have whatever tax/accounting year it choses - it is not 5 April nor any other fixed/arbitrary date - the directors have the choice and can choose whatever year end they want (although there are limitations as to how often it can be changed - extended only once every 5 years).
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Originally posted by ASB1) The turnover applies to the year in prgoress. Whether it is paid or not is irrelevant. Whether it was invoiced is also largely irrelevant since work in progress should be accounted for if it is expected to be paid.
2) You pay CT on the profits earned. Paying a dividend make no difference to these, thus no change to the Ct. Depending on your own personal tax position then when the dividend is paid might make a difference.
How do they define 'profit earned', what I have been doing is pay myself salary monthly then usually ever quarter paid myself a div. To work out the div I would minus from the business account future operating cost vat I owed, any corp tax from previous div payment, then take 19% off this and the remainder I paid as divs. So at the moment I have £xk set asside for corp tax is this all I need to pay, or is there a second set of corp tax I dont know about ??sh*t
Thinking Im getting confused companies house says the following is due for me and when,
Accounting Reference Date: 30/04
Last Accounts Made Up To: (NO ACCOUNTS FILED)
Next Accounts Due: 27/02/2008
Last Return Made Up To:
Next Return Due: 25/05/2007Last edited by MobileCheese; 9 April 2007, 17:34.
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The financial year accounting period is fixed at 5th April or thereabouts each year. I think the company accounting period that you refer to must be the annual return date for Companies House.
What my accountant does is to cut off the accounting period ending 31 March 200? and then use the cash flow into and out of the business account prior to that date as the basis for any P/L calculation.
I then take dividends from what is on the balance sheet for that accounting period. Any surplus monies are then subjected to CT.
It doesn't mean that it is right.
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1) The turnover applies to the year in prgoress. Whether it is paid or not is irrelevant. Whether it was invoiced is also largely irrelevant since work in progress should be accounted for if it is expected to be paid.
2) You pay CT on the profits earned. Paying a dividend make no difference to these, thus no change to the Ct. Depending on your own personal tax position then when the dividend is paid might make a difference.
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Company Year End / Divs etc
Hi,
Im comming upto my first company year end on the 30th April and have a few questions.
1. The company year end is the 30th April and Im due to get an invoice payment as well on the 30th April as well, will this invoice payment be included in this year end (30th Apr 2007) or next (30th Apr 2008) ?
2. Also I was due to take a dividend mid April, would I be better off waiting to pay it just before the 30th or does it not matter. Im not sure what happens company year end and someone mentioned I would pay corp tax on any profit in the company at year end so am I better off just trying to get as much out of the company as I can before year end, obviously leaving in the company account money I have set asside for vat and corp tax I owe on div payments I have already made ?
CheersTags: None
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