When you pay Corporation tax to HMRC, the payment clears your corporation tax liability. It appears as zero on your balance sheet.
The corporation tax still appears as a debit on the balance sheet, in the equity section. If required, move the corporation tax to the profit and loss nominal account.
Cause
Resolution
Move Corporation tax to the P&L nominal account
Go to Adjustments then Journals.
Select New Journal.
Enter the date of the journal.
NOTE:
Use the last day of the financial year the corporation tax relates to.
Enter a reference, then enter the following information:
Ledger Account*
Details
Debit
Credit
Include on VAT Return?
Corporation Tax (3050)
Corporation tax
5000
Leave clear
Profit and Loss Account (3100)
Corporation tax
5000
Leave clear
Select Save.
In the equity section of the balance sheet, you've now reduced the balance on the Corporation Tax nominal account to zero. You've also reduced the Profit and Loss Account balance by the amount of your corporation tax.
TIP:
Once you know how much corporation tax you owe, your accountant can record it using Sage for Accountants or Accounting Partner Edition. This ensures your accounts are accurate.