I just wanted to get my understanding clarified here.
There is an over-provision in earlier year's accounts for £2000. When I adjust it against the tax charge in the Income Statement for the current year, would it then mean that the tax payable for the current year to HMRC will reduce by the adjusted amount i.e. if current year's tax is £4400, after then adjustment entry of over-provision the net tax liablity will be £4400 - £2000 = £2400.
Am I correct about this? Please can anyone confirm to me.
From what you are saying, the 2012 accounts provision was wrong, not the liability on the 2012 CT600? If so, there will be no difference on the tax payable for 2013, as tax is calculated on the 2013 "profit before tax" - and that wont change.
An estimate tax bill may have been entered into the 2012 accounts, but then the 2012 CT600 figure was different. The effect of the overstated CT charge on the 2012 PL, was to reduce profit reserves. Your adjustment in 2013 will simply increase these back up to where they should be. The closing creditor should then be the actual liability for this year.
You can include a disclosure on the notes to shows
Charge for the year X Over provision last year (X) PL charge X
Please let me know if I have misunderstood
-- Edited by FoxAccountancyServices on Thursday 17th of April 2014 05:28:25 PM
