First Year Accounts with huge corp tax

[muralijv]

Hello Guys
I am a newbie to contracting and to this forum . I have finished my 1st year as an IT contracor. my accountant has produced my annual accounts and came up with 15k as corporation tax. I personally feel this is a huge amount.
do you think I can do something to reduce this amount.

My accounts Involves:
1. I took 10k PA as salary
2. rest of the dividend allowance.
3. other odd expenses : car allowance and odd stationary and acctant fees

any suggestions or help is much appreciated .

Regards

[max]

Hello Guys
I am a newbie to contracting and to this forum . I have finished my 1st year as an IT contracor. my accountant has produced my annual accounts and came up with 15k as corporation tax.

How much revenue was reported in the annual accounts ?

[Wanderer]

I have finished my 1st year as an IT contracor. my accountant has produced my annual accounts and came up with 15k as corporation tax. I personally feel this is a huge amount. do you think I can do something to reduce this amount.

Welcome!

ave a look at this calculator and see how much of your gross (ex vat) that you should be retaining for your salary/expenses level. Also understand that if you are taking over about £43k in salary/dividends then you are going to be hit with a big tax bill as a higher rate tax payer.

You should book an appointment to go through all this with your accountant and see if they can come up with any tax avoidance strategies. Common ones are retaining money in the company to pay out in some future year when you earn less than the higher rate tax, making your spouse a shareholder and splitting the dividend or putting money into a pension. Remember that your accountant works for you - if you don't understand something then get them to explain it to you.

From your vague summary, it's difficult for us to say if this is a huge amount or not without knowing what your profits after expenses (eg salary, travel etc) are deducted. By the looks of it, your company made a profit of £75k on a turnover of about £90k and now you are paying £15k tax on that. Is that correct? If you've personally taken all the profits as dividends (with no income splitting) then you are going to get hit with a bill for higher rate tax when you do your self assessment too. that's just a guess - you need to put your details into the calculator and see what comes out.

[Greg@CapitalCity]

There are two ways to pay less corporation tax;
(1) Earn less;
(2) Expense more;

Option (1) is undesirable, and so long as you are claiming all the expenses you can then option (2) is hard to increase. I would suggest you speak with your accountant and ask them to explain the common expenses other contractors claim, to determine if you are doing maximising your expenses. Some options are;
- Mobile phone (rules apply);
- Home office costs (claim £156 per year as a minimum)
- Travel (make sure you are claiming all that you can)
- Contribute to a pension
- Required IT equipment and software
- Annual Xmas party
- etc

[stek]

Perhaps the OP should have taken the advice he was offered previously when he said his accountant was useless...

http://forums.contractoruk.com/accou...bie-query.html

[MarillionFan]

Hello Guys
I am a newbie to contracting and to this forum . I have finished my 1st year as an IT contracor. my accountant has produced my annual accounts and came up with 15k as corporation tax. I personally feel this is a huge amount.
do you think I can do something to reduce this amount.

My accounts Involves:
1. I took 10k PA as salary
2. rest of the dividend allowance.
3. other odd expenses : car allowance and odd stationary and acctant fees

any suggestions or help is much appreciated .

Regards

15k is assuming a profit of £75k I believe.

So your turnover must have been £85K + expenses = £85k-£90k

If your turnover is signficantly less than that then it sounds high.

[stek]

15k is assuming a profit of £75k I believe.

So your turnover must have been £85K + expenses = £85k-£90k

If your turnover is signficantly less than that then it sounds high.

MF, if you look at hid previous post linked above you can see he budgeted 90k so you are spot on and the 15k is correct. Let's hope the OP hasn't spent it!

[SueEllen]

any suggestions or help is much appreciated .

Change to one of the accountants who frequent this forum?

Maybe perhaps the accountant that replied to this thread or the one that replied on your last thread? Hint: they tend to have the usernames that include a company name.

[malvolio]

MF, if you look at hid previous post linked above you can see he budgeted 90k so you are spot on and the 15k is correct. Let's hope the OP hasn't spent it!

Looking at that thread his numbers are all to hell anyway. He's included VAT as gross turnover but not deducted any for repaying it (assuming FRS), and he's not taken out CT. I fear there's a chance he's taken "dividend" payments from the gross and has not a lot left over...

[Sockpuppet]

Also April is a few months ago. Who wants to be the 9 month repayment deadlines is looming.