corporation tax

monkey8

If a limited company had a net profit of €200,000 and had bank loan repayments of €3333 interest and €6791 principal

am i caculating the tax correctly by this method

200,000 - 3333 = 196667
tax @12.5% = 24,583
profit = 172084 - 6791 (principal) = 165,293

Homework?
A repayment of principal would not be in the income statement - it would be a reduction of a liability on the balance sheet.

monkey8

Deleted User wrote: »

Homework?
A repayment of principal would not be in the income statement - it would be a reduction of a liability on the balance sheet.

I don't understand how that works!

Can I make the repayment of the principal from the net profit after tax?

exaisle

monkey8 wrote: »

I don't understand how that works!

Can I make the repayment of the principal from the net profit after tax?

The amount owed on a mortgage increases by the amount of interest charged by the mortgage holder/building society and decreases by the amount if principal AND interest repaid by the borrower. So...if you repaid nothing, the amount owed would increase by the amount of interest.

Repaying interest and principal ensures that the amount owed reduces over the period...eg 20 years. Some mortgages are interest only...so the balance or principal owed remains the same as the interest charged equals the repayments.

monkey8

thanks for replies guys.

I understand how the interest and principal works.

I am wondering from a practical point of view (rather than bookkeeping process) if I can pay the principle from the net profit after tax?

exaisle

monkey8 wrote: »

thanks for replies guys.

I understand how the interest and principal works.

I am wondering from a practical point of view (rather than bookkeeping process) if I can pay the principle from the net profit after tax?

Ultimately, unless you put money into the company, all of the repayments will be made out of the profits..in other words, if you don't make any profits, you won't have any money from which to make the repayments.

If you're thinking whether or not you should make a lump sum payment to reduce the mortgage, then that's a different question and depends on the circumstances. One for your accountant....