Corporation Tax in Brixx

What is corporation tax?

Corporation tax is a tax applied to the profit your business earns over each financial year.

In Brixx, this tax is accrued monthly across the financial year on your Profit & Loss report, then paid as a single lump sum in the month of your choice.

Not all of your business profit is taxable. To understand how Brixx determines taxable profit, see the final section of this guide.

 

When is corporation tax paid?

Corporation tax is paid after the financial year in which it is accrued.

For example, if your financial year runs from January to December 2019, corporation tax is calculated based on your profits up to December 2019. This tax is then paid at any point in 2020, depending on the month you choose.

You can set your financial year end in the Settings area, under the General Settings tab. This defines the 12-month period over which tax is accrued.

 

How do I use corporation tax?

Corporation tax is managed in one place — the Corporation Tax tab in Settings. Here, you’ll be able to:

  • Choose the month tax is paid

  • Set the tax rate

  • Enter any tax still owed from before your plan’s start date

To get started:

  1. Open your plan

  2. Click Settings (top-left of the screen)

  3. Go to the Corporation Tax tab

  4. Use the Paid in dropdown to select the month corporation tax is paid

  5. Enter your business’s applicable corporation tax rate

Modelling future changes in the corporation tax rate

If the tax rate is due to change during the plan, you can model this easily:

  1. In the Corporation Tax tab, click + Add Future Rate Change

  2. A new row will appear with a tax rate field and date selector

  3. Use the calendar icon to pick when the new rate takes effect

  4. Enter the updated tax rate

  5. This new rate will apply from the chosen date until the end of the plan

  6. To add more rate changes, repeat the process

  7. To remove a rate change, click X Remove

Corporation tax owed from before the plan start date

If your business has outstanding corporation tax from a prior year, this can also be added.

  1. Go to the Corporation Tax tab

  2. Just below the Paid in dropdown, tick the checkbox:
    “Is there any tax still owed from before the plan start date?”

  3. One or more input fields will appear based on your financial year setup

  4. Enter the amounts of any tax still due from:

    • A full financial year before the plan start date

    • A partial year, if the plan begins partway through a financial year

These values affect your Opening Balance and are recorded as liabilities in your plan.

What is taxable profit and how does Brixx calculate corporation tax?

Brixx uses a simple calculation for corporation tax. 

  1. Apply the % corporation tax rate to the taxable profit each month. 
  2. If the month makes a loss rather than a profit, apply the corporation tax % to this loss as a tax adjustment.
  3. Accrue 'Taxation and adjustment for losses' over the plan's financial year.
  4. If any tax is owed, pay this tax after the financial year has ended, in a month of your choosing.
  5. Alternatively, if no tax is owed at the end of the year and a tax adjustment has been accrued, carry this adjustment through to the next financial year.

What counts as taxable profit?

In Brixx, taxable profit is your profit before tax, with depreciation expenses excluded.

This means if you have assets being depreciated (via Asset components), your taxable profit will be higher than the Profit Before Tax line on your Profit & Loss report.

At the moment, depreciation is the only item excluded when calculating taxable profit in Brixx.

It’s worth noting that in reality, tax calculations can involve many more adjustments. For now, Brixx provides a simplified method to help you estimate how much corporation tax you might accrue and pay.