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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5027
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am using HMRC software and CT600 to submit my company accounts

Resolved Question:

I am using HMRC software and CT600 to submit my company accounts to HMRC. My question is about where to include other operating income of £3165 in the computational part of CT600. Other operating income represent a loan of £3165 previously taken out to fund trade which has now been written off by a creditor (who is not company owner or director).
In Profit & Loss account I have turnover in box AC12 £83, cost of sales in AC14 £14, gross profit in AC16 £69, distribution costs in AC18 £0, administrative expenses in AC20 £1209, other operating income in AC22 £3165, and Operating profit in AC24 £2025. Interest receivable AC28 £0, interest payable AC30 £24, and profit before tax AC32 £2001.
However, later in the computation part there is no box for operating income. The only boxes are: CP7 turnover/ sales: £83, cost of sales boxes CP9-13 amounting to £14, box CP14 gross profit £69. Expenses boxes CP15 to CP38, and in the summary gross profit in CP39 £69, followed by total expenses in CP40, interest received in CP43 and profit before tax in CP44. CP44 gives a result which is different from AC32, because other operating income is not shown anywhere in CP boxes.
Where should I include other operating income in the computation part of CT600 (CP boxes)?
Thank you for your answer.
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

I have had this problem in the past and if you were to call HMRC they would tell you that HMRC software is not suitable if you have other operating income. When you go to Compuations section there is no provision to enter other operating income from Box AC22.

You state "Other operating income represent a loan of £3165 previously taken out to fund trade which has now been written off by a creditor (who is not company owner or director)."

I presume this cost has in the past been expensed through either expenses or capital spend.

Here is a practical solution....
Include it within turnover so that this income can be taxed (assuming tax relief received on this expense in the past). Attach a note as a PDF file to the computations when you submit your return online.

I have done this in the past and it has been acceptable to HMRC. The alternative is to use commercial software to file your CT600 return.

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 3 years ago.

You state: "I presume this cost has in the past been expensed through either expenses or capital spend."

The loan was interest-free. Therefore, there was no expense. I am not sure what you mean by capital spend?

Also I have extensive trade losses (from the same trade) from previous years which would be offset against this new operating income (written off loan) reducing the tax liability to zero. I hope this is OK?

Expert:  taxadvisor.uk replied 3 years ago.
Ned, thank you for your reply.

I just wished to know what was the nature of spend was to which this loan related.
You must have bought something or spend this amount on some item(s) used in your business on credit from this creditor for which no payment would be made as the creditor has waived his debt. I accept the loan was interest free so there is no interest payable implications.

You will be able to offset losses brought forward against this year's profit which is mainly the write back of loan.

I hope this is helpful.
Customer: replied 3 years ago.

Thank you very much -- all clear. Could I just ask for clarification on one point: You state that I could attach a note as a PDF file to the computations. But how? At what point? Where does CT600 allow me to attach a note? Is there some button on the last page which I can click to attach a note before submitting my CT600?

Expert:  taxadvisor.uk replied 3 years ago.

Ned, thank you for your reply.

There is a provision to do so right at the end before your sign the declaration and submit the return. You may not wish to do so in case inclusion of the note invites questions from the tax man.

I hope this is helpful.

If you are happy and there are no more issues I will appreciate if you would kindly rate the service I provided to ensure I get credited for it.

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Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.
Your reward of a bonus is greatly appreciated.

Best wishes.