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would appreciate some help with how to answer this accounting sum

  • 07-10-2016 05:41PM
    #1
    businessdit
    Registered Users, Registered Users 2 Posts: 173 ✭✭


    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


Comments

  • #2
    secman
    Registered Users, Registered Users 2, Paid Member Posts: 7,253 ✭✭✭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.


  • #3
    businessdit
    Registered Users, Registered Users 2 Posts: 173 ✭✭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


  • #4
    dogsears
    Registered Users, Registered Users 2 Posts: 535 ✭✭✭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.


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