Corporation Tax – how the Professionals wave their magic wand – or is dark arts?

Corporation tax should be easy shouldn’t it – look at the Profit and Loss and then take 19% off to give to the Tax Man. But why, when you get your accounts and tax review, it doesn’t add up to that magical 19. What dark arts are being used in the background?

Now I’m not a Snape, rather saw myself in Gryffindor. So with that in mind let’s explain why it isn’t dark arts.

Well, firstly, from the 6th April 2017 corporation tax reduced to 19. However, us that wave the magic wand need to take your profits and split them between the 20% and 19% depending on where your year end is. First bit of magic!

Next is the really dark art of disallowable expenses. There are certain expenses that you can’t claim tax relief against; client entertaining, depreciation charges and fines and penalties being the top three. Oh, that speeding fine on the Firebolt, sorry, not claimable for tax purposes; or when you took Dumbledore out for a meal. However, one piece of good news is that although depreciation isn’t allowable for tax relief most of the assets you purchase you will be able to claim 100% of Annual Investment Allowance (AIA) in the first year; guess that’s a win to Griffindor.

Finally, if you’ve had losses in the previous year you can carry this forward and set against current year profits. This is especially important to start ups who may well have losses to start off with. Well perhaps the Slytherin Revenue aren’t so bad after all! All thanks to Snape.

If you have any questions regarding your corporation tax liability following this article please do contact us and I will do my best to wave my magic want and make it go away.

Paula