My first ever question on this forum is kind of embarrassing - it's part of why I want to become better informed on bookkeeping and accountancy issues, so it does not happen again.
Anyway, our small compay was fined £150 for late company accounts.
What nominal code in Sage should this come under?
It's not an expense in the ordinary meaning, and it's not a tax. I am guessing something in the 3200's because it is a sort of negative profit. What do forum members think?
A related question is how this should show up in the next set of company accounts. We only have to submit abbreviated accounts so it would not show up as a separate item, but I would like to know that I am treating it properly when I compile the totals. Is it a reduction to retained profit?
As one of our esteemed contributors on here often says, "there is no such thing as a stupid question, just a stupid answer"
So hopefully mine will not be a stupid answer.
I personally would create a nominal code in the 79xx range and call it something like Fines & penalties. This will have an affect (reduce) on profit and the therefore the balance sheet.
When it comes to corporation tax, you will have to add it back as part of your tax computation because fines are not tax deductible.
Re the next year, it is an expense, the same as your other expenses. If you submit abbreviated accounts, it shouldn't appear at all, other than, ultimately, be included in retained reserves.
I particularly noted "When it comes to corporation tax, you will have to add it back as part of your tax computation because fines are not tax deductible." I would not have thought of that, but it is obvious now you say it.
Right, my next task is to create a new nominal code. I made careful notes last time I did that, so it should work....
One of the downside of paying fines/penalties is that they are not allowed for CT relielf.
So as well as having to pay the penalty you also dont get any tax benefit from paying the penalty.
Never really understood the reasoning for it but them the rules. I am sure there is some reason for penalties/fines not being allowed for tax purposes in some old case law.
Never really understood the reasoning for it but them the rules. I am sure there is some reason for penalties/fines not being allowed for tax purposes in some old case law.
MarkS
Hi MarkS
They reason that it equates to other tax payers paying part of the fine. If you think about it they are having the fine reduced by 20%.
As a rule of thumb, it only applies to fines imposed by an Act of Parliament. Another example would be a speeding ticket, as it is a criminal offence.
Some court imposed penalties and awards are deductible, for example an award to an employee for injury incured through negligence of the employer.
Just thought I would add the last two paragraphs for those that weren't aware, as it is one of those querky bookkeeping points.
Nick - not sure why penalties couldnt be argued as being wholly and exclusively for the purposes of the business. If the accounts werent submitted late there would be no penalty so i would say that it does relate wholly and exclusively to the business.
Bill - are some parking penalties not allowed eg employee incurring parking ticket in the course of their job?
Mark, fines and penalties are as a result of doing something illegal, which crosses over into Bill's point.
You are also starting to walk the tenuous line of everything to do with the business is allowable for tax purposes.
Re your second point (to Bill), I would be rather unimpressed if my employee came back to the office and they incurred a parking ticket. I may pay it if there were circumstances which I was sympathetic to. But ultimately it is illegal and not eligible for tax relief. Same with a speeding ticket - it's the law.#
MarkS wrote:.... Bill - are some parking penalties not allowed eg employee incurring parking ticket in the course of their job?
MarkS
Hi Mark
If a parking ticket is handed to an employee, or the car is registered to the employee, the debt is the employees. If the employer pays, or reimburses the fine, then that is a benefit, or additional earnings on the part of the employee, so he is taxed on it. The employer can claim the payment as an expense (salary/ wages etc)
If the car is registered to the business, and the penalty notice is sent to the employer, then it is the business that is liable, and the fine is then not tax deductible.
