Business Summary and Corporation Tax Estimate
A limited liability company may prepare a corporation tax estimate, trading summary and business reserves summary report. The report may be printed as well as emailed to company members. A user may also post a journal to reflect the corporation tax estimate.
The system stores the relevant tax rates and allowances to allow for the computation.
The Process in Summary
- Select the appropriate accounting period
- Run thew corporation tax estimate
- Review the trading summary and business reserves reports
- Publish and email as required
- Post a journal if required
Corporation Tax Estimate
Having selected the relevant financial period a Corporation Tax Estimate screen is presented. The screen displays information from the business records held on the system. Information may be updated or added by a user to augment system data to improve the accuracy of the estimation. The system maintains corporation tax rates and allowances for each tax year, so the estimation is computed automatically. The estimated corporation tax is shown at the base of the page.
Displayed Data Sources and Meanings
- Profit before Tax
- Profit (or loss) before corporation tax for the financial period. The figure reported on the profit and loss statement.
Add: - (adjustments added to the Profit before Tax above to increase the taxable profit)
- The depreciation charged for the period. It is the sum of any depreciation in Cost of Sales, Distribution and Administration. Instead of depreciation capital allowances reduce the taxable profit (see below)
- (Profit) or Loss on Disposal
- The profit or loss on the disposal of a fixed asset is not a corporation tax relevant item and therefore the Profit before Tax is adjusted for any amounts recorded. Note there may be a capital allowance balancing charge or adjustment that may need to be included in the Other Capital Allowances box.
- Client Entertainment
- Entertainment expenses are not normally an allowable expense against corporation tax.
- Charitable Donations
- Any amounts posted to the account charitable donations are displayed here. They are added back to increase the taxable profits. If the user has additional information or knows that charitable donations have been posted to other accounts than they can amend the figure. In many instances charitable donations are allowable against corporation tax, in which case the user may enter the amount they know to be allowable in box 8 below.
- Political Donations
- Any amounts posted to the account political donations are displayed here, as political donations are not normally allowable against corporation tax. They are added back to the increase the taxable profits. If the user has additional information or knows that political donations have been posted to other accounts than they can amend the figure.
- Other Adjustment
- Use this box to enter any trading amounts the user knows should be added to increase the taxable profits. Otherwise it is left blank.
Less: - (adjustments subtracted from Profits before Tax above to reduce the taxable profit)
- Interest Received
- Amounts posted to the specific account. It is added back to be taxed as other income later in the page.
- Dividend Received
- Amounts posted to the specific account.
- Other Adjustment
- Use this box to enter any trading amounts the user knows should be entered to reduce the taxable profits. Otherwise it is left blank.
Capital Allowances are the corporation tax systems equivalent of depreciation. Depreciation calculated for accounting purposes is not allowable against taxable income, Instead capital allowances on qualifying assets are allowed. The corporation tax estimate extracts the details of the expenditure on fixed assets and determines one form of capital allowance known as Annual Investment Allowance. Other information the user may know with respect to capital allowances may be entered to refine the tax estimate. Note that this is potentially a complex area so professional advice is strongly advised if the user is uncertain.
- Annual Investment Allowance (AIA)
- Capital expenditure on Computer Equipment, Fixtures and Fittings, Plant and Machinery, Tractors & Combines and Commercial Vehicles are extracted for relevant computation period. Expenditure is assumed to be allowable against corporation tax. Note there are annual limits to the amount of allowable AIA. If these limits are exceeded any excess is displayed and only the allowable amounts carried forward in the tax calculation.
- Other AIA Adjustments
- Use this box to enter any AIA adjustments the user knows should be made. Otherwise it is left blank.
- Other Capital Allowances
- Use this box to enter any other capital allowances adjustments the user knows should be made. Otherwise it is left blank.
Adjustments to trading profit to give taxable total profits (TTP) are made in this next section.
- Interest Received
- Added back from above.
- Other Income Adjustments
- Use this box to enter any other income adjustments the user knows should be made. Otherwise it is left blank.
- Charitable Donations
- Confirm any charitable donation amounts the user knows to be allowable for reducing taxable profits. Click the to copy across the figures already recorded and that were shown above in box 1 above. Dismiss the warning message. Otherwise it is left blank.
- Chargeable Gains
- If the user is aware that the business has chargeable gains (or losses) that need to be taken into account they may be entered here. Gains are entered as a positive and losses as a negative amount. Otherwise it is left blank.
The relevant tax rates are then applied to Taxable Total Profits and the calculated estimated corporation tax is displayed. The tax rates are applied for the appropriate Financial Year. Note the Financial Year (FY) is the corporation tax year starting on the 1st April and ending on the following 31st March. FY?s are referred to by the year they commence. So FY14 is 1st April 2014 to 31st March 2015 and FY15 is 1st April 2015 to 31st March 2016 and so on. The system maintains the rates ready for calculations. The computation of Corporation Tax due is offered as an estimate only and, although is as accurate as possible, is in no way a full computation. Further consultation with your advisor is strongly advised. When ready click on SUBMIT button to complete the Business Summary report or DELETE button to start again.
The corporation tax estimate prepared above is carried forward into the Business Summary. The summary consists of a trading summary and a business reserves summary; both are displayed on the screen. Additionally a user can post a journal for the calculated corporation tax estimate as well as distribute the full report.
Post a Journal
The top half of the screen presentation of the Business Summary provides the user with an opportunity to post a journal of the corporation tax estimate. Click the POST button. A confirmation is shown at the top of the screen.
Previous journals from a corporation tax estimate are reversed, so only the impact of the current journal is given. The journals (and any reversals) can be seen from the Lists menu.
Ignore if a journal is not required.
Print or Email Report
A hard copy report is available by clicking the PRINT button. Alternatively, to email a copy to each company member tick the envelope symbol adjacent to those required and click the BULK MAIL button that appears. Note valid email addresses are indicated by the green envelope symbol, invalid or missing email addresses are shown with a red envelope symbol.
Company member records may be updated to amend or add an email address via the Shares menu item.
Entity Name-Shares-List Company Members-Edit the relevant member
Business Reserves Summary
The bottom section of the screen displays the Business Reserves Summary.
The summary displays the amount of business reserves that are attributable to the owners of the business. In effect what is left once all the business liabilities (including estimated corporation tax) have been dealt with. Assuming it is positive then it what the owners (shareholders) have got invested in the business; some of which, if the circumstances are correct, could be distributed to shareholders.
Displayed Data and Meanings
- Bank/Cash Balance
- The balances on business bank accounts and any cash on hand.
- Investments you have made
- Tangible and Intangible fixed assets the business has invested in.
- What is owed to you by:
- Other sources
- Less what you owe externally:
- Payroll liabilities owed to HMRC from payroll deductions
- VAT owed to HMRC
- to Suppliers
- to Any Others
- Reserves for the Business
- A positive balance represents reserves that, after allowing for any directors current accounts and corporation tax estimate, accrue to the benefit of the business owners. In effect the reward for their initiative.
- Owed to Directors on Current Accounts
- Amounts owed to the business directors on any current accounts. A positive figure would be amounts owed by the directors to the business.
- Called up Share Capital
- Called up share capital cannot normally be distributed as dividends so is deducted from reserves to give an estimate of free (available) reserves.
- Share Premium
- Share premium (where it exists) cannot normally be distributed as dividends so is deducted from reserves to give an estimate of free (available) reserves.
- Free Reserves
- A positive balance represents reserves that accrue to the benefit of the business owners and in the correct circumstances may be distributed as dividends.
- Dividends Payable
- The value of any dividends payable by the business on approved declarations
- Net Free Reserves
- A positive balance represents reserves, after any dividend declarations, that accrue to the benefit of the business owners and in the correct circumstances may still be distributed as dividends
- Allocated by Members
- The net free reserves allocated by each members' share-holding.
Click to start the whole process from the beginning. Any new information on the system will be included in the calculations.