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bigduckontax, Accountant
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Corporation Tax for small company: (1) 1st 12 Mth Tax period

Resolved Question:

Corporation Tax for small company:
(1) 1st 12 Mth Tax period ended 31/01/2016 with a tax liability to pay.
There has been no income since then (in fact not since 31/12/2015).
Pension contribution was paid on 27 Feb 2016 which was in the following period where there was no income and in fact this makes it a bigger loss. Is it possible to get a tax refund from the 1st period? I need to make my company dormant now.
(2)Invoices and duties performed were up to 31/12/2015 but my last receipt of monies due was in March 2016, please confirm that I have to account for all of my earnings to 31/12/2015 even though I did not receive all of it until March 2016 (or just what I received to 31/01/2016.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

I am formulating my reply so please do not make any further requests as my response might be lost in the process.

Customer: replied 1 year ago.
Hello Keith,
Were you able to read the question I lodged a few minutes ago before I went through your payment procedure?
John
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

I am formulating my reply so please do not make any further requests as my response might be lost in the process.

You can carry a loss back against a prior year's profits or carry it forward, whichever is more convenient. Here is the Gov UK guidance:

'Instead of carrying a loss forward, you can claim for the loss to be offset against profits for the preceding 12-month period (not accounting period). But you can only do this if your company or organisation was carrying on the same trade at some point in the accounting period or periods that fall in the preceding 12-month period.

For example, if your company or organisation has a loss of £8,000 in the accounting period 1 January 2010 to 31 December 2010 and profits of £20,000 in the preceding 12 months, you can carry back the £8,000 loss to be set off against the profits for the previous accounting year, reducing them from £20,000 to £12,000.'

You do not need to account for earnings outside the 12 month period, but I do accept in your circumstances that this might be adviseable then your company can go dormant without complications.

I do hope that you have found my response of assistance.

Customer: replied 1 year ago.
Thank you Keith.
(1) Am I right to presume that the offsetting of the loss in the current period cannot be done until I submit this period's tax computation. Basically, my situation means that I will be paying a fairly hefty tax bill for my 1st period and having to wait for the refund when I submit period 2's of make the company dormant. Can I speed up my submission for period 2 to get the refund?
(2) I also paid dividends to myself in periods 1 and 2. Can the Corporation tax loss from period 2 be off set against these as opposed to being carried back?
(3) It will help if I could only account for the monies I received in the period 1 Feb 2015 to 31 Jan 2016 (period 1). But this will be on a cash basis and not on an invoice basis. Which one will HMRC accept or reject. Earnings per invoices= £20,000 but only £15,000 received by the end of period 1 (not real figures).
Expert:  bigduckontax replied 1 year ago.

1. That is essentially correct.

2. Dividends do not count against profits for Corporation Tax (CT) in any event.

3. Many companies operate on a cash basis, but a principle of consistency must be adopted and you should not chop and change between the two. Preferably you should use an invoice basis as this is a more accurate assessment of any profit or loss made and is certainly HMRC's preferred method, indeed that Department may insist upon it.

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Expert:  bigduckontax replied 1 year ago.

Thank you for your support.