Tax administration for a company

Question 1

The self-assessment for companies - the responsibility:

Answer 1

• calculate its own corporation tax liability for each accounting period
• submit a self-assessment corporation tax return withing 12 months after the end of the period of account
• pay any corporation tax due within nine months and one day after the end of the accounting period

Question 2

The self-assessment tax return must be submitted by the later of:

Answer 2

• 12 months after the end of the period of account
• three months after the issue of the notice to file a return

Question 3

The self-assessment tax return must:

Answer 3

• contain all information required to calculate the company’s taxable total profits
• include a self-assessment of the amount of corporation tax payable for that accounting period
• be submitted online

Question 4

What all companies using electronically for tax return?

Answer 4

• Inline eXtensible Business Reporting Language

Question 5

What means Inline eXtensible Business Reporting Language?

Answer 5

• is the global standard for exchanging business information in an electronic format and tags the accounts so they can be read by a computer

Question 6

Three ways of submission of tax return

Answer 6

1. Integrated software applications - automatically inserts iXBRL tags to data and produces iXBRL accounts and/or computations
2. Managed tagging services - provided by agents whereby the company outsources the process of iXBRL accounts and computations into the required format
3. Conversion software applications - allows the company to apply appropriate iXBRL tags to each item of data itself to convert the accounts and computation into the required format

Question 7

When a company must notify HMRC when its first accounting period begins?

Answer 7

• within three months of the start of its first accounting period

Question 8

The time limit for notifying HMRC of chargeability?

Answer 8

• is 12 months from the end of the accounting period in which the liability arises

Question 9

What HMRC can issue to prevent companies deliberately the submission of the return HMRC

Answer 9

• determination assessment

Question 10

Determination assessment

Answer 10

• is treated as a self-assessment by the company, and is replaced by the actual self-assessment when it is submitted by the company
• there is no appeal against a determination assessment. Instead, the company must displace it with the actual self-assessment return
• can be raised at any time within three years of the filing date (i.e. four years from the end of hte period of account)

Question 11

The records that must be kept include records of:

Answer 11

• all receipts and expenses
• all goods purchased and sold
• all supporting documents relating to the transactions of the business, such as accounts, books, contracts, vouchers and receipts

Question 12

The records must be retained until the later of:

Answer 12

• six years after the end of the accounting period
• the date on which a compliance check into the return is completed
• the date on which it becomes impossible for a compliance check to be started

Question 13

Either the company or HMRC may make amendments to a return:

Answer 13

• HMRC may correct any obvious errors or mistakes within nine months of the date that the return is filed with them
• a company can amend the return within 12 months of the filing date, ap 31 March 2022, filling date is 31 March 2023, until 31 March 2024 amendments
• if an error is discovered at a later date, then the company can make a claim for overpayment relief to recover any corporation tax overpaid.

Question 14

Claims for overpayment relief

Answer 14

• the claim must be made within four years of the end of the accounting period to which it relates

Question 15

The payment date for corporation tax depends on the size of the company:

Answer 15

For companies which are not ‘large’:
- the due date is nine months and one day after the end of the accounting period
For ‘large’ companies:
- liability is settled by quarterly instalment payments
All companies must pay their corporation tax electronically

Question 16

The key points of definition of a large company:

Answer 16

• is one whose augmented profits for the accounting period in question are more than £1.5 million
  The £1.5 million threshold is time apportioned for short accounting periods, and is divided by the total number of related 51% group companies

Question 17

Companies that become large during an accounting period do not have to make instalment payments provided:

Answer 17

• their augmented profits for the accounting period do not exceed £10million, and
• they were not a large company for the previous accounting period

Question 18

Calculation of augmented profits:

Answer 18

Taxable total profits x
Plus: Dividends received from non-group companies x

Question 19

The threshold are divided by the number of related 51% group companies. Two companies are related 51% group companies if:

Answer 19

• one is a 51% of another, or
• both are 51% subsidiaries of a third company
  Doormant companies are excluded from being 51% group companies, overseas companies are included if the 51% test is met

Question 20

Four quarterly instalment for large companies are due:

Answer 20

• by the 14th day
• in months 7,10,13,16 following the start of the accounting period
  First two instalments are paid during the AP

Question 21

What is the basis of payment for quarterly instalments?

Answer 21

• are based on the expected corporation tax liability for the current accounting period
  Interest will be charged or paid based on the actual corporation tax due per the final tax return

Question 22

Short accounting periods - less than 12 months:

Answer 22

• first instalment due by: 14th of 7th month after the start of the AP
• subsequent instalments are due at 3 monthly intervals thereafter, until the date of the last instalment is reached
• last instalment due by 14th day of 4th month after the end of the accounting period
• for an accounting period of 3 months or less, the full tax due for the accounting period is due on the date of the last instalment, i.e. 14th day of 4th month after the end of the accounting period
• the amount of each instalment:
  # (estimated CT liability for AP) x (n/length of AP)
  n =3 months for a full quarterly instalment
  n = 2 or 1 for the last instalment if the period since the previous instalment is less than 3 months

Question 23

There are two key types of interest

Answer 23

Late payment interest
- calculated at 3.25% p.a.
Repayment interest
- calculated at 0.5% p.a.

Question 24

Interest is automatically charged if corporation tax is paid late. Interest runs:

Answer 24

• from: the normal due date
• to: the date of payment
• it’s deductible expense from interest income

Question 25

Interest is paid by HMRC on any overpayment of corporation tax. Where interest is due, the interest runs:

Answer 25

-from: the later of due date or the date of actual payment
- to: the date of repayment

Question 26

Offence and penalties - late filing of corporation tax return

Answer 26

Within 3 months of filing date - fixed penalty = £100
More than 3 months after filing date - fixed penalty increased to £200
Fixed penalties rise to £500 and £1,000 if persistently filed late (i.e. 2 preceding periods also late)

Question 27

Offence and penalty - additional penalties

Answer 27

6-12 months after filing date - additional 10% of tax outstanding 6 months after filing date
More than 12 months after filing date - additional penalty increased to 20%
Failure to keep and retain records - up to £3,000 per accounting period

Question 28

The compliance check ( enquiry) may be made as a result of any of the following:

Answer 28

• suspicion that income is undeclared
• suspicion that deductions are being incorrectly claimed
• other information in HMRC’s possession
• being part of a random review process

Question 29

HMRC must give written notice before commencing a compliance check by the following dates:

Answer 29

If return is filed on time
- the notice must be issued within 12 months of the actual delivery of the tax return to HMRC
If return is filed late
- notice must be issued within 12 months of the 31 January, 30 April, 31 July or 31 October next following the actual date of delivery of the tax return to HMRC
Once this deadline is passed, the company can normally consider the self-assessment for that accounting period as final

Question 30

HMRC can demand that the company produce any or all of the following:

Answer 30

• documents
• accounts
• other written particulars
• full answers to specific questions
• 30 days to comply with the request
• 30 days to appeal, in writing, against HMRC’s amendment

Question 31

The key points of additional assessment referred to as discovery assessment:

Answer 31

• restricted where a self-assessment return has already been made, can be raised at a later date to prevent the loss of corporation tax
• cannot be raised where full disclosure was made in the return, even if this is found to be incorrect
• only a company that makes full disclosure in the self-assessment tax return, therefore, has absolute finality 12 months after the actual submission date

Question 32

The time limit for making a discovery assessment is:

Answer 32

Basic time limit
- time form the end of AP four years
Careless error
- time form the end of the AP six years
Deliberate error
- time from the end of the AP twenty years
A discovery assessment may be appealed against