Tips

Sage 50cloud Accounts

How to Record Corporation Tax

Corporation tax is a tax on the profits of your limited company, paid to HM Revenue & Customs (HMRC).

Sage 50cloud Accounts has a specific area for Taxation in its chart of accounts.  You can use this to show your corporation tax as an expense on the profit and loss after the net profit is calculated.

Create Corporation Tax Nominal Codes

Before you begin you need to set up the nominal codes for corporation tax unless they are already in your list of codes.  If you are using Sages default nominal codes, we recommend you use the following:

Nominal                                                            Management

Code               Name                                        report                           Report selection

2110                 Corporation tax Liability              Balance Sheet               Current Liabilities

9001                 Corporation tax                         Profit and Loss              Taxation

  1. Click Nominal codes then click New.
  2. Complete the Nominal Record as follows:

N/C       Enter the nominal code you want to create, for example, 2110.

Name    Enter the name of the account, for example, Corporation tax liability.

  1. Click Save then click Close.

You can now ready to add your new nominal codes to your chart of accounts.

Add corporation tax to your Chart of Accounts

  1. Click Nominal codes then click Chart of accounts.
  2. Select the required chart of accounts then click Edit.
  3. Click the Profit & Loss tab and click Taxation.
  4. Under the Taxation column, enter a description, for example, Corporation Tax.
  5. In the Low and High columns, enter 9001,
  6. Click the Balance Sheet tab and click Current Liabilities.
  7. Check that Nominal code 2110 is within a Current Liability range.
  8. If required, add a range to include 2110.
  9. Click Save then click Close.

Record corporation tax

In this example corporation tax of £2150.00 is to be recorded.

  1. Click Nominal codes then click Journal entry.
  2. Enter a reference and the date for the journal, then enter the relevant details to record the corporation tax. Date the journal the last day of the financial year to which the corporation tax relates.

For example:

N/C       Name                                Details                     T/C       Debit                Credit

9001     Corporation Tax             Corporation Tax             T9        2150.00

2110     Corporation tax liability   Corporation Tax             T9                                2150.00

The balance must equal zero before the journal can be saved.

  1. Click Save then click Close.

Paying the corporation tax

  1. Click Bank accounts then click Bank payment.
  2. Enter the details of your bank payments in the boxes provided. Using our example above, you are paying corporation tax of £2,150.00 to HMRC

Bank    Date                 N/C      Details                                      Net            T/C      Tax

1200     Payment Date   2110    Payment of Corporation Tax       2150.00     T9         0.00

  1. Click Save then click Close.

Corporation tax refunds

If you receive a corporation tax refund, you can record this using a journal entry and a bank receipt.   In this example, a corporation tax refund of £510 is to be recorded.

  1. Click Nominal codes then click Journal entry.
  2. Enter a reference and the date for the journal, then enter the relevant details to record the corporation tax refund. Date the journal the last day of the financial year to which the corporation tax refund relates.

For example:

N/C       Name                                Details                     T/C       Debit                Credit

9001     Corporation Tax             Corporation Tax             T9                                510.00

2110     Corporation tax liability   Corporation Tax             T9        510.00

The balance must equal zero before the journal can be saved.

  1. Click Save then click Close.
  2. Click Bank accounts then click Bank receipts.
  3. Enter the details of your bank receipts in the boxes provided. Using our example above, you are receiving a refund of £510.00 from HMRC.

Bank    Date                 N/C      Details                          Net            T/C      Tax

1200     Receipt Date     2110    Corporation tax refund   510.00        T9        0.00

  1. Click Save then click Close.

If you would like help creating new nominal codes, entering your corporation tax journal and or entering bank payments/receipts or need any other help, please contact us

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