Any, for profit, business entity, be it a sole trader, a partnership, or a limited liability company, will need to compute and adjust its profit or loss for tax purposes, that is, the figure assessable to business income tax or corporation tax and subject to the income, or corporation tax legislation, in force during the relevant year of assessment and/or financial accounting period.
It is necessary to distinguish revenue, from any capital income and expenditure, to add back notional charges in the financial accounts for example, depreciation charges, and any computed profits or losses on asset disposals, and claim any capital allowances as appropriate, relating to any capital investment in fixed assets, or to compute balancing allowances or charges, when capital assets have been disposed of.
This, in a nutshell is all there is to it!
However, there can be issues relating to tax efficiently extracting profits from a limited liability company, to payrolling benefits in kind paid to directors and/or employees, for example company cars, or beneficial loans (exceeding £10,000).
In certain circumstances, corporation tax (currently payable at the rate of 32.5%) is borne by the company when an officer of a close company loans money for personal purposes and this indebtedness remains the case more than 9 months and 1 day after the company’s financial year end.
Then there is the anomaly, which I still don’t understand, whereby the corporation tax, due on a company’s profits, is payable 9 months and 1 day after the financial accounting year end, and yet the company’s annual tax return, from which its liability to corporation tax, is assessed, can be filed up to 12 months, following the end of its financial year end.
In good faith, If anyone from HM Revenue & Customs can explain to me the logic behind this apparent, cart before the horse syndrome, I await your enlightenment.
At the end of the day, I am not a tax specialist, however I like to think that I possess a good working knowledge of the subject.