Corporation Tax Self Assessment

The key features are:

  • a company is required to pay the tax due in advance of filing a tax return
  • a 'process now, check later' enquiry regime when the tax return is submitted
  • the inclusion in the tax return, and in a single self assessment, of the   liabilities of close companies on loans and advances to shareholders and others,   and of liabilities under Controlled Foreign Companies legislation
  • the requirement for companies to self assess by reference to transfer   pricing legislation.

Practical effect of CTSA for companies

Notice to file

Every year, HMRC issues a notice to file to companies. In most cases, the   return must be submitted to HMRC within 12 months of the end of the accounting   period.

Filing your company tax return online

Companies must file their corporate return online. Their accounts and computations must also be filed in the correct format - inline eXtensible Business Reporting Language (iXBRL).

Unincorporated organisations and charities that don't need to prepare accounts under the Companies Act can choose to send their accounts in iXBRL or PDF format. However any computations must be sent in iXBRL format.

Penalties

Penalties apply for late submission of the return of £100 if it is up to   three months late and £200 if the return is over three months late. Additional   tax geared penalties apply when the return is either six or twelve months late.   These penalties are 10% of the outstanding tax due on those dates.

Submission of the return

The return required by a Notice to file contains the company's self   assessment, which is final subject to:

  • taxpayer amendment
  • HMRC correction, or
  • HMRC enquiry.

The company has a right to amend a return (for example changing a claim to   capital allowances). The company has 12 months from the statutory filing   date to amend the return.

HMRC have nine months from the date the return is filed to correct any   'obvious' errors in the return (for example an incorrect calculation). This   process should be a fairly rare occurrence. In particular the correction of   errors does not involve any judgement as to the accuracy of the figures in the   return. This is dealt with under the enquiry regime.

Enquiries

Under CTSA, HMRC check returns and has an explicit right to enquire into the   completeness and accuracy of any tax return. This right covers all enquiries,   from straightforward requests for further information on individual items   through to full reviews of a company's business including examination of the   company's records.

The main features of the rules for enquiries under CTSA are:

  • HMRC generally have a fixed period, of 12 months from the date the return is   filed, in which to commence an enquiry
  • where the company is a member of a group (other  than a small group), HMRC can raise an enquiry up to 12 months from the due  filing date
  • if no enquiry is started within this time limit, the company's return   becomes final - subject to the possibility of a Revenue 'discovery'
  • HMRC will give the company formal notice when an enquiry commences
  • HMRC are also required to give formal notice of the completion of an   enquiry, and to state their conclusions
  • a company may ask the Commissioners to direct HMRC to close an enquiry if   there are no reasonable grounds for continuing it.

Discovery assessments

HMRC have the power to make an assessment (a 'discovery assessment') if   information comes to light after the end of the enquiry period indicating that   the self assessment was inadequate as a result of fraudulent or negligent   conduct, or of incomplete disclosure.

Summary of self assessment process

Example

A company prepares accounts for  the 12 months ended 31 May 2016 and submits the return  by 31 December 2016. Key dates under CTSA are:

01.03.17 Payment of corporation tax   31.05.17 Deadline for filing the return   31.12.17 End of period for HMRC to open enquiry (being 12 months from the date the return was actually filed)

On 31 December 2017 the company tax position is finalised subject to HMRC's   right to make a discovery assessment in some circumstances.

Payment of tax

There is a single, fixed due date for payment of corporation tax, nine months   and one day after the end of the accounting period (subject to the Quarterly   Instalment Payment regime for large companies).

If the payment is late or is not correct, there will be late payment interest   on tax paid late and repayment interest on overpayments of tax. These interest   payments are tax deductible/taxable.

Credit interest

If a company pays tax before the due date, it receives credit interest on   amounts paid early. Any interest received is chargeable to   corporation tax.

Loans to shareholders

If a close company makes a loan to a  participator (for example most shareholders in unquoted companies), the company  must make a payment to HMRC if the loan is not repaid within nine months of the  end of the accounting period. The amount of the tax is 32.5% of the loan for  loans made or benefits conferred on or after 6 April 2016. The tax charge is 25%  of the loan for loans made prior to 6 April 2016.

This increased rate mirrors the dividend upper rate. The  government has noted that this will prevent individuals gaining a tax advantage  by taking loans or making other arrangements to extract value from their  company rather than remuneration or dividends.

Additional  rules for loans to shareholders

Further rules prevent the  avoidance of the charge by repaying the loan before the nine month date and  then effectively withdrawing the same money shortly afterwards.

A '30 day rule' applies if  at least £5,000 is repaid to the company and within 30 days new loans or  advances of at least £5,000 are made to the shareholder. The old loan is  effectively treated as if it has not been repaid. A further rule stops the tax  charge being avoided by waiting 31 days before the company advances further  funds to the shareholder. This is a complex area so please do get in touch if  this is an issue for you and your company.

This tax is included within the CTSA   system and the company must report loans outstanding to participators in the tax   return.

How we can help

Do not hesitate to contact us if you require any further information.

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