The Book-keepers Forum (BKF)

Post Info TOPIC: Income Tax


Newbie

Status: Offline
Posts: 3
Date:
Income Tax


Hi everyone,

I have just been asked this question and don't know how to answer.

Why do we use the net sales figure when calculating profit but the gross labour figure? Their thinking is they are both taxes collected by HMRC so why is one included when the other is not.

Any help would be great, thank you!



__________________


Guru

Status: Offline
Posts: 909
Date:

biggerontheinside wrote:

Hi everyone,

I have just been asked this question and don't know how to answer.

Why do we use the net sales figure when calculating profit but the gross labour figure? Their thinking is they are both taxes collected by HMRC so why is one included when the other is not.

Any help would be great, thank you!


Because otherwise the business would be paying tax on the difference between the labours net figure and the labours gross figure which would mean not only is recipient of the payment paying tax but also the business which would then mean double taxation on the same amount.



__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Expert

Status: Offline
Posts: 1738
Date:

Another point to go with Doug's:

The 'net sales figure' you refer to is net of VAT. The VAT is collected at the point of sale by the business on behalf of the vampires tax office. It is never money that belongs to the business to start with, so isn't included in the sales.

When it comes to labour costs, however, the amount the business is paying its employee's is the gross amount - and that's what's reported. The business is then deducting the tax from the employee (the tax is in effect paid by the employee) on behalf of the vampires tax office.

Your confusion therefore seems to be because these are two different taxes, paid for by two different sets of people (customers and employees) and collected by one - the business.



__________________

Vince M Hudd - Soft Rock Software

(I only came here looking for fellow apiarists...)



Master Book-keeper

Status: Online
Posts: 8003
Date:

A thank you to the boys wouldnt go amiss!



__________________

Joanne

Fallows Hall Ltd

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

Page 1 of 1  sorted by
 
Quick Reply

Please log in to post quick replies.

Tweet this page Post to Digg Post to Del.icio.us
Members Login
Username 
 
Password 
    Remember Me  

2007-2019 The Book-keepers Forum (BKF). All Rights Reserved. The Book-keepers Forum (BKF) is a trading division of Bookcert Ltd. Registered in England Company Number 05782923. 2 Laurel House, 1 Station Rd, Worle, Weston-super-Mare, North Somerset, BS22 6AR, United Kingdom. The Book-keepers Forum and BKF are trademarks of Bookcert Ltd. This forum is a discussion forum only. There will usually be more than one opinion to any question and any posting should not be viewed as a definitive solution. No responsibility for loss occasioned to any person acting or refraining from action as a result of any posting on this site is accepted by the contributors or The Book-keepers Forum. In all cases, appropriate professional advice should be sought before making a decision. We reserve the right to remove any postings which are offensive, libellous, self-promoting or engaged in covert marketing. We will not notify users of removals. The views expressed in the forum posts are those of the individual and do not necessary reflect or agree with those of The Book-keepers Forum. Any offensive or unsuitable posts will be removed by the moderators. Any reader of this forum can request for a post to be looked into by sending an email to: info@bookcert.co.uk.

Privacy & Cookie Policy  About