would appreciate some help with how to answer this accounting sum

businessdit

Hi Folks -

Perhaps someone can advise on how o do this calculation:

Last year a company generated €100,000 in sales.
We pay corporation tax @ 12.5% on €100,000 = €12500 corp tax.

The company bought a van for €40,000 meaning that in 2016 they will have a depreciation capital allowance of €5000 for 2016.

Can I knock €5000 off the €12500 corporation tax bill for the year?
Or does it just mean that I knock €5000 off the €100,000 sales and calculate corporation tax from the remaining €95,000?

Thanks

secman

businessdit wrote: »

Hi Folks -

Perhaps someone can advise on how o do this calculation:

Last year a company generated €100,000 in sales.
We pay corporation tax @ 12.5% on €100,000 = €12500 corp tax.

The company bought a van for €40,000 meaning that in 2016 they will have a depreciation capital allowance of €5000 for 2016.

Can I knock €5000 off the €12500 corporation tax bill for the year?
Or does it just mean that I knock €5000 off the €100,000 sales and calculate corporation tax from the remaining €95,000?

Thanks

Sales of €100,000
What about cost of sales and overheads or did you mean profit of 100,000 ?

If it's profit of 100,000 you take allowable capital allowances from this figure and apply CT rate of 12.5 % to the net profit after capital allowances.

businessdit

secman wrote: »

Sales of €100,000
What about cost of sales and overheads or did you mean profit of 100,000 ?

If it's profit of 100,000 you take allowable capital allowances from this figure and apply CT rate of 12.5 % to the net profit after capital allowances.

Thanks for the reply.

Its mostly profit, the 100,000 - in an industry where the owner is a consultant so no real expenses.

So what you're saying is that I can't reduce the final corporation tax bill for the year by 5,000euro? I simply reduce the amount that has to be assessed for corp tax?

Thanks

dogsears

businessdit wrote: »

Thanks for the reply.

So what you're saying is that I can't reduce the final corporation tax bill for the year by 5,000euro? I simply reduce the amount that has to be assessed for corp tax?

Thanks

That is correct.