SMEs trading as limited companies will know that the corporation tax due on the company’s profits are payable in one instalment nine months after the year end. Thus if the company financial year end is 31 December, the tax is due by 30 September the following year.
It would be foolish, however, to put the tax bill at the back of your mind, only to worry about it nearer the time payment is due.
The prudent thing to do is to prepare regular management accounts, say every month, and certainly at least quarterly, which not only quantify the business’s profits earned to date, but also provide for the tax due on those profits. This enables the owners of the business to establish what funds are available for them to take out of the business without taking monies which should be already earmarked for paying the tax bill when it comes.
This approach does not make one look forward to receiving that brown envelope when it comes, but it does take away some of the pain!
I provide online accountancy services for owner/managed businesses which enables my clients to concentrate on their money earning work.
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