2020 Results and Tax
On this page, we'll set out our financial information for the year for full transparency.
Forecast
In October 2019, our forecast for the year to September 2020 was:
- Turnover: £952,700
- Profit: £103,770
Final results
The final results for the year ending 30 Sept 2020 were:
- Turnover: £759,189
- Profit (after tax): £146,312
We had planned a period of rapid growth, but this was curtailed half way through the year by the pandemic, which added to the disruption in the public sector from Brexit. Sales turnover was therefore lower than forecast. But profit was higher than forecast because in January 2020, when we saw a potential pandemic on the horizon, we paused investment and growth plans and focused instead on building cash reserves.
Payments to Directors
The director of the company was paid £54,692 in salary in this financial year, all through PAYE. This represented a multiple of 1.1 of the average salary in the company during the period. The director planned to take a reduced salary for the first 2 years of starting the company, but has extended this three times due to economic uncertainty surrounding Brexit and the pandemic.
Research and Development Tax Credits
Given our work in the digital sector we undertake research and development projects for ourselves, and our clients.
The government incentivises and rewards R&D to foster innovation using a system of tax credits managed by HMRC. Each year we submit a report on the projects we have done, the R&D elements of those, the staff time spent on them, and any resulting outputs. That report is then assessed and we are awarded a certain level of tax credit, which is calculated as a percentage of the staff time and other costs we have invested in the R&D.
The credit awarded is shown below in the computation for Corporation tax.
Taxation
Corporation tax
The Corporation Tax incurred by the company in this financial year was calculated as:
Tax charge and adjustment details
£
Profit (Loss) before tax
144,134
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Corporation tax on profits at UK standard rate
27,385
Capital allowances
(1400)
Expenses not deductible for tax purposes
1,814
Tax losses utilised
-
R&D Tax Credit
(30,531)
Current Tax Charge
(2,732)
Movement in deferred taxes
554
Total tax charge for the period
(2,178)
The primary reason for the difference between the expected current tax charge and the actual current tax charge is Research and Development (R&D) tax relief. This relief supports companies that work on innovative projects in science and technology. Companies can claim enhanced expenditure for qualifying costs they incur on R&D projects, the deduction can be 230% of the qualifying cost or they can claim a tax credit if the company is making a loss, worth up 14.5% of the surrendered loss.
Other items that are affecting the current tax charge are:
- Expenses not deductible for tax - Some expenses incurred may be entirely appropriate charges for inclusion in its financial statements but are not allowed as a deduction against taxable income when calculating tax liability. E.g. Entertaining.
- Depreciation in excess/(shortfall) of capital allowances - The accounting treatment of capital assets differs from the tax treatment. For accounting purposes, an annual rate of depreciation is applied to capital assets and charged to the profit and loss account. For tax purposes, the depreciation charge is added back and instead, a tax capital allowance is claimed, a relief provided by law. Over time, however, these differences will equal one another.
Accelerated capital allowances or fixed asset timing differences arise when there are temporary differences between the net book value of qualifying assets in the accounts and their equivalent tax written down values. This is because the accounting treatment of capital assets is usually different than the tax treatment allowable. In the accounts, an asset is depreciated over its useful economic life; whereas capital allowances are set rules in tax law applied to the type of asset. The differences, however, between the net book value of qualifying assets in the accounts and their equivalent tax written down values – are only timing differences – as eventually, the accumulative depreciation and the capital allowances claimed will equal one another. The movements in this deferred tax provision will be recognised in annual instalments over the useful economic lives of the assets. It is not expected that this will have an impact on the company tax bill in the near future.
PAYE / NIC
The company and our team paid £110,395.88 of PAYE/NIC to HMRC in this financial year.
VAT
The company raised £124,147.64 (net) of VAT on behalf of HMRC in this financial year.
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Therefore, the overall contribution in UK taxes generated as a result of our business activities this year was £232,365.52.
Annual accounts for year end Sept 2020
Our accounts for this financial year are available on Companies House, and the full unabbreviated accounts are also available here for full transparency:
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Last modified 8mo ago