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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hello, I'm filling in my CT600, HMRC own-brand stuff. I

Resolved Question:

Hello,
I'm filling in my CT600, HMRC own-brand stuff.
I lent the company £2632 by buying tools/materials on personal credit cards, or by paying for things with cash (mechanic only accepts cash, and DIY won't take cards for less than £10), so they're not on the bank statement. I have the receipts. I then took that lent money back when the business had it, during the same financial year. So, it's not turnover, as it's a loan (no tax), and it's not earnings, as it's an interest-free loan repayment (no tax).
I've put the receipts under their relevant heading (Cost of Sales; Admin; etc) as though the business has paid for them, as they are legitimate business expenses (just ones the business couldn't afford at the time), and I'd like to deduct that amount from the dividends amount paid to myself (because it's NOT earnings), but then it doesn't balance... The loan repayment isn't recorded anywhere, so there's too much profit left, which they'll calculate Corporation Tax for, which isn't right.
In the CT600, where do I record the money I lent the company? and where do I record the business repaying that loan back in full with no interest? £2632 lent to the business over the year by buying tools/materials outside of the bank account; £2632 paid back from the business account, interest free.
Please help!
Thanks
Brad
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for requesting I answer your question.

As I understand you funded the operation out of own funds and then withdrew money when the business was financially sound and able to repay you.

The entries in your books for payments out of own funds should be
DR Cost of sales and/or expenses £2,632 (Box AC14/AC20)
CR Directors' account (creditors) £2,632 (Box AC58)

When you were repaid for these purchases, the entries would be
DR Directors' account (creditors) £2,632 (Box AC58)
CR Bank account £2,632 (Box AC54)

You will see DR and CR in Box AC58 cancel each other and there is no balance at year end.

As far as dividends go, you should only show amounts paid to you as dividends in the financial period in Box AC38

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Hello,

Thanks for getting back to me so quickly.

So, you have two entries for the same box AC58. So you mean they cancel each other out and therefore should be 0 or left blank?

To clarify, and use actual figures, the amount of non-PAYE that came out of the business account into my personal account was:

OUT £7220

Of which I consider was was loan repayment £2632

Therefore dividend = £4587

Correct?

If so, am I fundamentally not understanding something simple..? If all of the above is correct (please tell me if it isn't!) and effectively the loan isn't recorded because they cancel each other out... Will I be paying too much corporation tax? Or does that 'spare' £2632 actually work out because ultimately it was 'spent' in the Cost of Sales/Admin..?!

My end of year bank balance was £2700 from £53 the previous year end. £2647 increase.

With putting £4587 as dividend

my Net Balance For The Period is £2932

Thanks

Brad

Expert:  taxadvisor.uk replied 2 years ago.

Brad, thank you for your reply


So, you have two entries for the same box AC58. So you mean they cancel each other out and therefore should be 0 or left blank?

[a]

yes

To clarify, and use actual figures, the amount of non-PAYE that came out of the business account into my personal account was:

OUT £7220

Of which I consider was was loan repayment £2632

Therefore dividend = £4587

Correct?

[a]

Correct .. only £4,587 is dividend as the rest is repayment to you of monies advanced to the business.

If so, am I fundamentally not understanding something simple..? If all of the above is correct (please tell me if it isn't!) and effectively the loan isn't recorded because they cancel each other out... Will I be paying too much corporation tax? Or does that 'spare' £2632 actually work out because ultimately it was 'spent' in the Cost of Sales/Admin..?!

[a]

You are not paying too much corporation tax as £2,632 is included in cost of sales/expenses before arriving at the profit before tax.


My end of year bank balance was £2700 from £53 the previous year end. £2647 increase.

With putting £4587 as dividend

my Net Balance For The Period is £2932

[a]

I don’t follow this bit.... what is this net balance figue of £2,932.



I hope this is helpful and answers your original and supplementary questions.

taxadvisor.uk and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

That's great. Thanks for your help! Really made me feel much more confident :-)

Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.