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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.

Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this blog with Cathy you can call her on 01908 605552.




Date: 2nd November, 2009
Author: Cathy Corns


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