Adding corporation tax to your financial plan
Last month we quietly slipped Corporation Tax, a long-awaited feature, into the app. Well, I say quietly – we emailed everyone we know about it! But this is the first time we’ve mentioned it here on the blog. Here’s how it works:
How does corporation tax work in my Brixx business plan?
Corporation tax is a simple feature currently – but we’d like to make its options more advanced in the future.
The amount of tax you owe is accrued over your financial year. This is often different to the January – December calendar year and can be set in the Settings page of your Brixx plan. Once you get the end of your financial year the amount of corporation tax you need to pay can be totalled up. You can then specify in the app the month in which you will actually pay this corporation tax to the government.
Corporation tax is a tax applied to the taxable profit the plan generates. Taxable profit is not quite the same as profit before tax. There are some financial activities which do not count towards the profit for taxation purposes. For example, depreciation, the wear and tear on assets over time, does not generally count as an expense where taxation calculations are concerned. As a result, depreciation expenses reduce profit before tax, but do not reduce taxable profit.
There can be other exceptions to the calculating corporation tax too – and we will provide the ability to make these adjustments to taxable profit in a future update.
One of the most difficult parts of specifying this feature was ensuring that payments are made at the correct times. All corporation tax payments are paid (on the Cash Flow) after the financial year in which they are accrued (on the Profit and Loss). Setting this up in the app was easy enough but determining the logic for any existing corporation tax payments left me scratching my head more than once!
For example, if the plan I am making is for an existing business, then I will likely have corporation tax that I owe from my previous financial year that hasn’t yet been paid. But if I am part way through my financial year at the very start of the plan then I may end up already having 2 separate accrued tax payments to make. Depending on the delay between the end of my financial year and the month that I pay corporation tax, I may have some corporation tax that I owe from the part of this current tax year that has already elapsed AND a full year’s accrued corporation tax from the previous financial year, which has not yet had its cash payment settled either!
I’m sure you’ll agree from that last paragraph, this is surely one of the most riveting blog posts that has ever appeared on brixx.com. But this is what we get up to in between designing more interesting things like new reports and comments.
Speaking of which – we’re hoping to have both ready for you in the first months of 2019 😉
What’s in store next?
In the meantime, we have also been working on another update! This will add GST and Sales Tax to the app, and provide new options for controlling the payment of these taxes and the value added tax option that is already available in the app. This update will also include a dramatic overhaul of the data entry methods for grids, allowing much-improved copy/paste and selection, as well as adjustments to selections of existing data and Excel-style cell-based extrapolation. Phew! I’ll cover all of this in detail in our next Brixx update.
If you would like to know more about using corporation tax in Brixx (and frankly who wouldn’t!) click here to read our guide.