Corporation tax guide

jonniebgood1

Is there any clear guide to how you can estimate corporation tax liability. The basis for this tax is that it is due on profits but I need more detail on what is considered profit.

i.e. income minus Wages paid minus Purchases = profit.

But what purchases are not considered for this. i.e. my business bought 2 vans. Am I correct that these cannot be used in the equation above?

Filibuster

CT is charged on Net Profits

Sales - COS (Purchases) = Gross Profits

Gross Profits - Admin Expenses (Wages, Light & Heat etc) = Net Profits


The purchase of a Van is considered a purchase of an asset and does not come into the Profit and Loss account straight but rather over a number of years (i.e. depreciation/capital allowances). For the purposes of taxation, Revenue allows a rate of 12.5%.

CIARAN_BOYLE

jonniebgood1 wrote: »

Is there any clear guide to how you can estimate corporation tax liability. The basis for this tax is that it is due on profits but I need more detail on what is considered profit.

i.e. income minus Wages paid minus Purchases = profit.

But what purchases are not considered for this. i.e. my business bought 2 vans. Am I correct that these cannot be used in the equation above?

I would sit down with an accountant and ask for their advise.

Van would be considered a capital item. You can't claim them as an expense but rather capital allowances over 8 years.

jonniebgood1

Thanks for advice. I will be meeting with accountant- just needed some grasp beforehand for my own piece of mind.

Is all plant and machinery considered as capital items?

For example -A construction company can hire a digger to complete excavation on a project and it is considered a purchase so is tax deductible. If the same company buys a digger to do the same excavation it is then considered a capital purchase and is not tax deductible. This seems contradictory?

Filibuster

jonniebgood1 wrote: »

Thanks for advice. I will be meeting with accountant- just needed some grasp beforehand for my own piece of mind.

Is all plant and machinery considered as capital items?

For example -A construction company can hire a digger to complete excavation on a project and it is considered a purchase so is tax deductible. If the same company buys a digger to do the same excavation it is then considered a capital purchase and is not tax deductible. This seems contradictory?

No it is tax deductible the cost of the asset is just put against profits over a 8 year period (Capital Allowance rate of 12.5%). So if you buy a digger for €1,000 you're allowed to offset €125 against your profits each year for 8 years (or until you sell the digger).

HcksawJimDuggan

jonniebgood1 wrote: »

Thanks for advice. I will be meeting with accountant- just needed some grasp beforehand for my own piece of mind.

Is all plant and machinery considered as capital items?

For example -A construction company can hire a digger to complete excavation on a project and it is considered a purchase so is tax deductible. If the same company buys a digger to do the same excavation it is then considered a capital purchase and is not tax deductible. This seems contradictory?

Most purchases of plant & machinery would be considered capital items. Some companies will have a policy of capitalising only items over a certain amount e.g. Items over €500

Hire of machinery would be an admin expense

Purchasing equipment through finance leases/operating leases & hire purchases would also have varying tax and accounting treatments.

Cost of hiring digger = fully tax deductible in year of hire
Cost of buying digger = 12.5% of cost is tax deductible over next 8 years