How do I Handle Corporation Tax?
Easy Books provides the basis for working out how much corporation tax your business is liable for. Assuming the business settings are already set with the correct year end date, and that date has passed, we can run a Profit and loss report to get the operating profit.
We then need to work out the tax owing, and enter this and the payment(s) in Easy Books. This article describes these steps.
Calculating the tax your business owes can be simple, but it depends on your business and the tax rules that apply. In my own situation, I do this using the P&L report as a basis, adding back any depreciation, applying capital allowances and so on. Your accountant may handle your tax calculation for you, and supply you with the final figure for the tax owed. Once you have the figure, enter this dated on the last day of your tax period. This is a transfer between the Profit and Loss account (under Capital) and the Corporation tax due (under Creditor). Don't worry if your P&L account goes negative for now, step 2 will transfer your total profit into this account.
Run the P&L report again, and this time use the option to Consolidate. This will lock the tax year and you will only be able to add new entries dated after it. The overall profit is transferred to the Profit and Loss account, which should now show a positive balance (we hope).
When you eventually settle the tax bill, you probably pay by cheque or by transfer from your bank account. Assuming this, you should enter a new transaction from your bank account. Pick the date as the date you pay the tax, set the amount and pick Corporation tax due as the other account. If you pay an instalment, just use that amount. Easy Books will reduce the balance showing as owed on the Corporation tax due account and reduce the bank account balance. Most likely you'll pay the whole tax amount in one payment. In this case you'll expect to see the balance on Corporation tax due return to zero.
We hope you find this article useful.