How do I record corporation tax?

Corporation tax is a tax on limited company profit, paid to HM Revenue & Customs (HMRC).

Sage 50 Accounts includes a Taxation area in the chart of accounts. You can use this to show your corporation tax as an expense on the profit and loss report after the net profit calculates.

Create the corporation tax nominal codes

Before you begin you need to set up corporation tax nominal codes. If you use the default nominal codes, we recommend you use the following:

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

   N/C	Enter the nominal code number you want to create, for example, 2110.
   Name	Enter the name of the account, for example, Corporation tax liability.

3. Click Save then click Close.

You are now ready to make sure your new nominal codes are added 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 £/€5000 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 with 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	5000.00
   2110	Corporation tax liability	Corporation tax	T9		5000.00

   The balance must equal zero before the journal can be saved.
3. Click Save then click Close.

Pay the corporation tax

1. Click Bank accounts then click Bank payment.
2. Enter the details of your bank payment in the boxes provided. Using our example above, you're paying corporation tax of £/€5000 to HMRC.

   Bank	Date	N/C	Details	Net	T/C	Tax
   1200	Payment date	2110	Payment of corporation tax	5000.00	T9	0.00

3. Click Save then click Close.

Corporation tax refunds

If you receive a corporation tax refund, you can record this using a bank receipt a journal entry. In this example, a corporation tax refund of £/€600 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 with the last day of the financial year to which the refund relates.
   
   For example:

   N/C	Name	Details	T/C	Debit	Credit
   9001	Corporation tax	Corporation tax refund	T9		600.00
   2110	Corporation tax liability	Corporation tax refund	T9	600.00

   The balance must equal zero before the journal can be saved.
3. Click Save then click Close.
4. Click Bank accounts then click Bank receipt.
5. Enter the details of your bank receipt in the boxes provided. Using our example above, you've received a refund of £/€600 from HMRC.

   Bank	Date	N/C	Details	Net	T/C	Tax
   1200	Receipt date	2110	Corporation tax refund	600.00	T9	0.00

6. Click Save then click Close.

TIP: You can find out more about corporation tax at www.gov.uk/corporation-tax