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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I am a director of a small Community Interest Company with

Customer Question

I am a director of a small Community Interest Company with a very small turnover £5000 in the first year. We have been given two accounting periods for Corporation Tax as our first financial year is longer than 12 months. The one ends in February and the second in June with very little change in the financial status between those dates. Do we have to pay the full 20% tax on the balance if the balance is virtually the same in both periods I.e. End up paying tax twice on virtually the same amount of can we only pay the tax once and then submit a nil return for the second period?
Submitted: 10 months ago.
Category: Tax
Expert:  bigduckontax replied 10 months ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to be able to help you with your question.
Corporation Tax (CT) is not payable on the balance, but on the profit, or in this case, any surplus, in each accounting period. CT is at 20%. Here is Scottish Widows advice on the subject:
'A corporation tax accounting period may not be longer than 12
months (although it can be shorter). If the company’s period of
accounts is greater than this, i.e. 15 months, (and it has remained
active throughout the period), it must file two company tax returns
as this will be treated as two separate accounting periods.'
Thus the company will not be taxed twice on the same income, each period being a stand alone accounting event.
I do hope that I have been able to set your mind at rest on this matter.
Customer: replied 10 months ago.
Thanks but in my mind if the 'profit' or balance in the account in the second period is the same or virtually the same as in the first period due a lack of activity in the period then CTax is being paid twice in the same amount. Is that correct? If so can this be avoided in any way?
Expert:  bigduckontax replied 10 months ago.
No it is not. The same activity is not recorded twice. Each accounting period will have its own unique entries. They cannot meet as you suggest.
Expert:  bigduckontax replied 10 months ago.
Let me expand my answer.
Let us suppose that the first year is 1 Jan 14 to 31 Dec 14 then the transactions for that period will be entered and a balance struck and a surplus exposed. The period 1 Jan 15 to 31 Mar 15 will have the transactions for the second period only entered and again a balance struck. Thus the income and expenditure are not double counted.
Customer: replied 10 months ago.
Thank you
Expert:  bigduckontax replied 10 months ago.
Delighted to have been of assistance.
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