HMRC have updated their guidance for trading companies who are now loss making but were profitable and paid tax in prior years.
It has long been the case that when a company files its corporation tax return, it can carry a trading loss back to a prior year and reclaim corporation tax paid in that prior year. It has, however, been necessary to have finalised the current period accounts and file the tax return to be able to claim this repayment.
The new guidance states that under certain circumstances, companies can now apply for such a repayment of tax before they have finalised their tax position for the current accounting period. A claim can be made where:
– The circumstances of the company have changed; and
– Its liability for the accounting period has not been fully established but evidence indicates that a tax refund will be due.
The company must give notice stating the amount which it considers should be repaid, together with details of the change of circumstances and evidence to support the belief that the amount of tax paid in the prior year exceeds the company’s probable corporation tax liability for the 2 years in question.
If the second accounting period is complete, HMRC will accept draft/management accounts and draft tax calculations as evidence. If the company is only part way through the second period, further evidence will be required including forecasts, director’s reports and industry commentary. Each claim will be looked at on a case by case basis.
Companies can also apply for repayment of excessive quarterly instalments in the current or prior year.
HMRC have not yet specified how to make such claims – they will need to be in writing so we are looking for information in respect of an email/online process.
If you think this will be relevant to your business and require further advice, please speak to a member of the corporate tax team or contact Claire Astley using the button below.