Hi all,
I had an overpayment of tax last year, so was advised to pay a bit less this year. However, this creates a liability when I tagged bank payment of the slightly reduced amount to the QF computed corporation tax amount. Can anyone tell me how to adjust this in QF?
Many thanks,
Sol
Hello @solarpower03
The support team are not registered accountants. I would reccomend reaching out to your accountant for professional advice.
I will leave this thread open for now as there are several accountants on the forum who may wish to comment.
How did you deal with the tax due (as opposed to paid) for that accounting year? Normally you’d have some sort of journal that debits a P&L code for the corporation tax charge for the year and credits a liability code for the corporation tax liability. And when you pay the tax that is a debit to the same liability account, which would normally balance it out back to zero.
If you’ve paid more than you owe then that should leave a residual debit balance on the corporation tax liability nominal (so it’s actually an asset rather than a liability). This year’s corporation tax journal should then leave you with a liability total that is less than your actual tax charge for the year, and your reduced payment will balance it out to zero.
To put some concrete figures on it, suppose that in the first year you paid £10,000 but it turns out you only owed £9,000. So your journal would have £9,000 debit on the P&L corporation tax code and £9,000 credit on the liability nominal. Your £10,000 payment would be a debit on the same “liability” nominal, leaving it £1,000 in debit overall.
Now in the second year you determine that you owe £10,000 - the journal will put £10,000 debit on P&L and credit on the liability nominal, which leaves its balance at £9,000 credit, so you pay £9,000 (debit to the liability nominal) to leave everything balanced at zero.
Over the two years you owed £19,000 and you paid £19,000, so everything lines up nicely.