Taxation

This records the Corporation Tax charge for the period as recognised in the profit and loss account. As an expense it normally carries a debit balance — the outstanding amount still owed to HMRC is tracked separately as a liability in code 2110.

Real-world examples

Simple trading company

A small trading company with straightforward finances — a consultancy with few fixed assets, say — has a 9001 charge that's simply the current year's Corporation Tax on taxable profit, calculated once accounts are finalised. £7,600 of tax on £40,000 profit is a debit of £7,600 to 9001 (Taxation) and a credit of £7,600 to 2110 (Corporation Tax), with nothing more complicated sitting behind the figure.

Capital-intensive business

A capital-intensive business — a haulage firm with a large vehicle fleet, for example — often has a deferred tax element on top of the current tax charge, because the accounting depreciation charged on its vehicles rarely matches the capital allowances HMRC gives for tax purposes in the same year. On top of a current tax charge debited to 9001 and credited to 2110, the business may also post a separate deferred tax adjustment reflecting that timing difference — a complexity a business with few fixed assets doesn't have to deal with.

Commonly confused with

Because code 9998 (Suspense Account) sits right next to this one in Suspense & Taxation, it's a common mis-posting target. Code 9001 is specifically for taxation, while 9998 covers suspense account — similar in nature, but keeping them separate is what makes the suspense & taxation section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

Balances left sitting in Taxation for too long are one of the first things an accountant or auditor checks, because it means the underlying transaction hasn't actually been coded correctly yet — so reported figures elsewhere are provisional until it's cleared.

Other codes in Suspense & Taxation