A tax return in the UK declares a liability for taxation and is filed with HM Revenue and Customs. A company tax return, then, is filed by a company or association that receives a notice to deliver a Company Tax Return (Form CT603) from HM Revenue and Customs.
Depending on who files the return and concerning different forms of taxation, there are a few main returns that are in use currently:
- CT600 – Used by companies who need to pay Corporation Tax
- SA800 – Used by partnerships
- SA900 – Used by trusts and estates of deceased people
- SA100 – Used by individuals to pay income tax
- VAT100 – Used to pay Value Added Tax
- P35 – Used by employers for PAYE deductions and National Insurance contributions
Now that we know a little bit about the different kinds of returns filed with the HMRC, let’s take a closer look at Company Tax Returns and understand filing timelines.
HMRC Company Tax Returns – Timelines
Corporation Tax was brought to the UK as part of the Finance Act of 1965 along with capital gains tax which has since been abolished. It is taken from UK-based companies on the profits they make in the UK as well as on those of entities registered overseas but having a permanent establishment(s) in the UK. A return must be filed regardless of whether or not a company makes profits or has no Corporation Tax to pay. For those who are self-employed as a sole trader or are in a partnership, Self Assessment returns are used instead.
While Company Tax Returns may seem synonymous with just Form CT600, they include a lot more like a company’s tax and accounts computations and any supplementary documentation that they deem fit to provide.
It is usually delivered no later than 12 months after the end of the accounting period. We have a more detailed look at this in our blog on CT600 filings. Detailed guidance on filing deadlines can be found here.
HMRC Company Tax Returns – Computations
Filing Company Tax Returns to the HMRC is an activity that involves a bunch of figures and requires a lot of arithmetic. One must include calculations to delineate how the facts in the Company Tax Return form have been derived from the figures in the company’s accounts, as part of your return. All the data considered imperative to explain the deduction of the figures in the Company Tax Return form should be included within a single iXBRL computations file.
Form CT600 contains a lot of fields related to the final computation of Corporation Tax owed that we have briefly touched on in our previous blog. Here, we will briefly describe Corporation Tax allowances and reliefs.
When calculating the total Corporation Tax owed, some deductions can be made to lessen the tax burden. Mileage, training, and accommodation are some of the allowable expenses one can claim as long as they are necessary to the business and wholly and exclusively for business purposes. It should be treated as a benefit if the above conditions are not. Purchases like machinery, vehicles, and equipment that are business assets are outside the scope of these allowances but may fall under claims for capital allowances.
Corporation Tax reliefs are another way for companies to exempt themselves from certain taxes and minimize their Corporation Tax bill. Here’s a list of certain reliefs that are available to companies that fit certain criteria:
- Creative industry relief: When calculating taxable profits, companies involved in film, television, video games, etc. may be able to claim a larger deduction for themselves
- R&D relief: Companies working on innovative science and technology projects may be able to claim this
- Disincorporation relief: When a company transfers assets to its shareholders (when there is a change in the ownership structure, for example), this relief allows it to dispose of those assets without incurring a Corporation Tax on the transaction
- Patent Box: A lower Corporation Tax rate may be available for profits earned through patented inventions and certain other types of innovation
- Trading, terminal, capital, and property income losses: If losses are made from trading, the sale or disposal of a capital asset, or on income from a property, this relief may be availed
Now that we know a fair bit about some of the allowances and reliefs afforded by the HMRC, let’s take a brief look at different company types that exist under Company Tax Returns in the UK. The CT600 form requires making an entry as to the type of company and it may be left blank if a company doesn’t fall into any of the categories mentioned below:
- Unit trust or open-ended investment company
- Close investment-holding company
- Company in liquidation
- No longer used
- Insurance
- Members’ club or voluntary association
- Property management company
- Charity or owned by a charity
- Real Estate Investment Trust (residual or tax-exempt company)
While the normal rate of corporation tax in the UK is around 19% for FY beginning 1st April 2021, lower effective tax rates are possible with the use of allowances and relief mentioned above that can almost halve that. Now, let’s take a quick look at the repercussions of late submissions.
HMRC Company Tax Returns – Consequences
The HMRC imposes penalties on those entities that fail to submit their Company Tax Returns to them in the stipulated time. The schedule of these charges for lapse is as below:
For returns that are late 3 times in a row, penalties are charged at the rate of £500 instead of £100. If tax returns for your company are more than 6 months late, you will receive a letter from the HMRC with a Corporation Tax figure it thinks it is owed. This is known as Tax Determination and cannot be appealed. It must be paid when you eventually file your return and the HMRC recalculates interest and penalties owed to it.
It is possible to appeal a late filing penalty by writing to your company’s Corporation Tax office if you have a reasonable excuse. More information on what constitutes a reasonable excuse can be found here. Alternatively, you can call the Corporation Tax helpline.
If you’re wondering how to make changes to your CT returns post-filing, our next section addresses the steps you need to take to do so.
HMRC Company Tax Returns – Amendments
Per the HMRC, any changes to your filing must be made within 12 months of the filing deadline. To amend your Company Tax Return you can log in to the HMRC online services, use commercial software and send a paper return or write to your company’s Corporation Tax office. Importantly, the HMRC may conduct tax compliance checks and charge a penalty for errors in your Company Tax Return.
It is imperative to choose a solution that can provide you with an error-free filing experience so you can avoid penalties and file without care.
How can Fin-X Solutions help with HMRC Filing
Fin-X Solutions® is an HMRC-recognised iXBRL managed tagging services vendor and application provider offering a compelling choice for UK companies to outsource their iXBRL tagging and conversion process. We have been involved with XBRL filings in the UK for over a decade and provide our product and services in many other jurisdictions including the US, Ireland, the EU, South Africa, the Middle East, Malaysia, and many more.