This is an illustrative example of a company with an annual revenue of €1 million that has borrowed money to invest in new equipment or premises and has relatively high operating costs. It demonstrates how a company’s corporation tax liability may only be a small proportion of its revenue.
| Total Revenue | €1,000,000 |
|---|---|
| Operating costs (e.g. costs relating to providing services, maintaining equipment, plant and premises and purchasing raw materials) | (€650,00) |
| Administration costs (e.g. staff, property costs) | (€75,000) |
| Annual deduction for capital expenditure) | (€150,000) |
| Interest (i.e. relief on debt interest costs arising from borrowings to fund expansion) | (€100,000) |
| Profit before tax | €25,000 |
| Corporation tax at 20% of profits | €5,000 |