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FRIDAY FAQ: Why do my accounts not match my tax return?

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This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.

Q. Why do my accounts not match my tax return?

Answer: When you are preparing your tax return one of the most important things to make sure is that everything balances.

A common question, which causes confusion for many business owners is, “why does the profit or loss presented on my tax return not match the profit or loss on my financial accounts”.

Well, there are several reasons why it might not match. For instance, it may be due to adjustments made on the account, or, you may have included something as an tax-allowable expense when it is classed as a disallowable expense; entertainment costs is an example of this.

It could even be due to add-backs or capital allowances.

When your business buys a capital asset, a proportion of the cost is shown as a daily running cost. This is called ‘depreciation’. As depreciation isn’t allowable for tax, capital allowances are used. This means the business can deduct the capital allowance from the profit before working out the tax due.

If you are unsure where the discrepancy is, please seek the assistance of your accountant.

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