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Small Business - Corp Tax question

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dunkrag01dunkrag01 Forumite
1 posts
MoneySaving Newbie
Hi - my accountant is telling me one thing and another accountancy friend is telling me another.. I'm trying to unpick the advice and find out if my accountant needs a lesson (and whether I need to possibly change accountants!). 

Small business made £50k profit last year (Jan 31st 2020 year end). 

I understand that if I extend the year end by 6 months to July 31st, the £10k Corp Tax profit get kicked down the line a bit. I would pay 12/18th of £10k in November when originally due and then the remaining 6/18th of £10k at the end of April 2021 (9 months after the new year end). 

The question I can't get a straight answer on is how the P&L for the 6 month extended period comes into play... If the company has made a £50k loss in the 6 months between Feb - July 2020 for example - does that wipe out the profit 100% from the previous 12 months - so no corp tax due? - Given covid etc, it's not far off that position for example.. 

My accountant is saying the £10k will still be due for the original 12 month period.. 

Thanks for any help!

Replies

  • edited 7 July at 9:18AM
    nick74nick74 Forumite
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    edited 7 July at 9:18AM
    Your accountant is right in the sense that if you lengthen a company year end there will still be a corporation tax return due for the first 12 months, as a CT600 can not cover a period greater than 12 months. In theory the tax for this 12 month period would still due on the same date as before.

    However, if you extend the accounting period then the combined profit/loss for the full 18 months is time-opportioned over two corporation tax returns, 12/18ths worth on the first return and 6/18ths on the second return. So yes, if your tax loss for the next 6 months cancels out your taxable profit for the first 12 months then you would have no tax liability over all and nothing to pay.
  • PennywisePennywise Forumite
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    Although the trading profit is time apportioned, capital allowances fall into each separate period, so maybe that's what your accountant is thinking about.  Otherwise, yes, maybe time for a new accountant.  Is your current accountant properly qualified/regulated with a CCAB professional body?
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