Corporation tax debts
Companies are not directly affected by the increase in personal tax rates but many are still having financial difficulties. One key cash-flow component is corporation tax, so is there anything you can do to reduce this?
- Make provisional loss claims
If a trading company is now making losses, it can submit a provisional claim for those losses to be carried back and reduce the previous years tax liability, now payable.
- Stock write-downs
Accounting rules require stock to be held at the lower of cost and net realisable value. On this basis stock write-downs are generally an allowable deduction for corporation tax purposes. You may, therefore, wish to consider their impact on current year results and tax liabilities.
- Review provisioning policies
It is important to assess the company’s accounting policies to ensure that provisions for expenditure of a revenue nature are allowable for corporation tax purposes.
For bad debt provisions, evidence of action taken to attempt to collect the debts should be documented as additional support for a specific provision.
- Repair work
Where a company has a legal obligation to carry out future repair work (for example, under a lease), it may be possible to obtain a tax deduction for this as long as there is an appropriate provision in the accounts.
- Capital allowances
Once the Annual Investment Allowance (£50,000 at 100%) has been utilised, capital allowances are, at best, 20%. You should, therefore, look at the timing of additions to take full advantage of the 100% relief.
Date: 2nd November, 2009
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