How to record non allowable expenses

[gamnlifestyle]

Hi, I have paid a fine for late filing last year. I created a separated account under 8xxx for this.

How do I tag it as a non-allowable expense so it doesn’t show up in the Profit & Loss report?
Also, being this software double-entry accounting, if I deduct the £150 of this fine from its 8xxx expense account, how does it balance out “on the other side”?

Thanks

[Paul_Courtier]

Debits and credits. If you deduct from one you have to add to another. That’s how double entry works.

BTW there’s a difference between an allowable company expense, and an expense allowable for tax. In my opinion it should be shown in the p and l. But what you do when preparing your tax return is to not include it in your tax calculation.

[gamnlifestyle]

Hi Paul, thanks for your answer!

@Paul_Courtier

If you deduct from one you have to add to another.

@Paul_Courtier

But what you do when preparing your tax return is to not include it in your tax calculation.

I am aware of this, and that is what I am not fully understanding.
What I did to record this fine on Quickfile was to input the expense on my bank account and tag it as “something else on this list”. The result should be:
[8520] Late filing fines account - 150.00 Debit
[1206] Bank account - 150.00 Credit
Firstly, is this the correct way to record this on Quickfile? Or did I have to create a proper bill invoice?

Secondly, on HMRC website I read that a fine for late filing is a non-tax-allowable expense, so what I understand is that I cannot use it in the equation Income - Expenses = Taxable Profit for corporation tax.
I can also leave it like this on Quickfile, but in order to not calculate this expense -as if it never happened- before submitting my accounts to HMRC, I understand that I need to download and edit my P&L and Balance Sheet from QF, then “credit back” 150.00GBP on [8520] account, but what should I do with the balance on the bank account? If I “credit back” on [8520], where do I “debit back”? Is this even the right way to do this or am I misunderstanding the process?

@Paul_Courtier

BTW there’s a difference between an allowable company expense, and an expense allowable for tax.

Could you please explain this further? I always do all the accounting myself, but this is the first time I come across this type of expense (also hope it’s the last one ) so I not really sure of what I am doing.

[Paul_Courtier]

So if its an allowable company expense its recorded in the p and l as an expense.

If its not allowable for a reduction in tax then its a tax calculation adjustment.

In other words when you calculate the tax due you calculate it based on the expense not reducing your profit. You don’t alter the accounts you just simply calculate the tax on the profits by adding back the expense that isn’t allowed…

Adding back disallowable expenses is a tax calculation not an accounting change. It shouldn’t alter anything you do in quickfile. It should be done prior to ct600 submission.