Businesses, Tax Year & Employee Pay

Robbie G said:
Nope. Corporation tax is +/- 28% of pre-tax profit. The point is that you cannot change this pre-tax profit figure, just by changing the date you pay your employers. So no, it wouldn't (or shouldn't) change your cash flow situation.

For example, if you chose to pay your employers one year after the corresponding salary period, you'd be accruing that salary in your accounts for a year. Therefore your profit would include the cost, whether you've paid it or not.
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In fact if you didn't include that salary expense in your accounts(which you have to) you'd be liable to more corporation tax as your profit would be higher (but it isn't).


Trying telling HMRC that you wish you defer the corporation tax you owe them by six months...and that it's fine as it's just swings and roundabouts :p.

28% of your profit is worth more to them now, than whenever you decide you feel like paying it x months down the line :D.
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Actually HMRC are quite receptive at the moment to deferred payments especially to SME's but obviously its on a case by case basis
 
Dark88 said:
You account for things on the accruals concept, i.e when the expense is incurred, not when the cash is actually paid over.
i.e. if you pay your utilities on a quarterly basis and your year ends half way through a quarter, you'd accrue the expense for the amount of months through that quarter.

Your tax would then be calcd based on your accounts.
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Yes, that makes total sense. It seems really silly that I have just done a whopping big exam on business and tax... and accrual was something that wasn't explicitly explained on the course, utterly daft really.

Robbie G said:
Trying telling HMRC that you wish you defer the corporation tax you owe them by six months...and that it's fine as it's just swings and roundabouts :p..
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I'll try *gulp* :D
 
Robbie G said:
Yes it would?
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Nope. Wages/salaries/bonuses not paid 9 months after the year end become a disallowable expense.

Wages/salaries/bonuses not paid by the filing date of the return (if sooner than 9 months) should be assumed to be not have paid by the 9 month deadline and should be disallowed as an expense. If in the interim period they are paid then an amended return should be submitted.

Pension payments not made by the year end date are a disallowable expense.

Tax is a wonderful thing :p :D
 
Robbie G said:
Sorry if I've missed something but employee's pension payments are surely unlikely to be a factor in matters of corporation tax?
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You're absolutely right, and that's why we have to check on it. Employers invariably show an accrual for unpaid pension payments at the year end. This often includes both the employer's contributions to the pension scheme(s) and the employees' contributions deducted from their salaries. We have to get a split between the employer and employee pension contributions so that we only disallow the unpaid employer contributions, rather than including the employee contributions.
 
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vonhelmet said:
Employers invariably show an accrual for unpaid pension payments at the year end. This often includes both the employer's contributions to the pension scheme(s) and the employees' contributions deducted from their salaries.
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Really, wow. I can't understand why that would be.

E.g. for someone on £60k with a 5% defined contribution pension, at the end of the month, your journals for unpaid employee benefits (ignoring NI etc.) would surely be:

Dr salaries control £5,000
Dr pensions £250 (employer)
Cr accruals £5,250

Then when you pay the employee and the pension company:

Cr bank £4,750 (employee)
Cr bank £500 (pension company)
Dr accruals £5,250

Obviously I've missed something in the way some companies like to do their accounting.
 
ours would be like

At the end of the month:

DR Monthly Salaries £5000
CR Salaries Control Account £4750
CR Pensions Control Account £250

DR Company Pension Scheme £250
CR Pensions Control Accoutn £250


On payment of salaries

DR Salaries Control account 4750
CR Bank 4750

On payment to pension company

DR Pensions Control Account 500
CR Pension Company 500
 
daver said:
ours would be like

At the end of the month:

DR Monthly Salaries £5000
CR Salaries Control Account £4750
CR Pensions Control Account £250

DR Company Pension Scheme £250
CR Pensions Control Accoutn £250
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Ok, so you're not showing employee contributions in pension costs either, which I agree with. Surprised that some do though.
 
They said the reason they are doing it is because we get paid 4 weekly and since next year is a leap year we would be paid 14 time in the financial year which isn't right ?
 
if your contract says you are paid 4 weekly and they havent properly consulted with you or your union over a change, then they are breaching your contract over pay. Pay issues are a fast track to employment tribunal especially non-payment, but as they are only paying you 6 days late the issue would be resolved by the time you could file your ET1
 
MadMan-JaMeS said:
They said the reason they are doing it is because we get paid 4 weekly and since next year is a leap year we would be paid 14 time in the financial year which isn't right ?
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Probably some truth in that.

A 4 weekly pay cycle means that 13 pay cycles = 52 weeks = 364 days.

Every 4 years or so, they probably make an adjustment to align their accounts with the tax year.
 
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