HMRC letter - Differences in the loss position of Company Tax Returns
Background
HMRC have identified inconsistencies relating to Company Tax return (CT600) filing. In some cases, amounts in the CT600s submitted do not reconcile with those in the corresponding corporation tax computations provided.
HMRC have written to companies with entries in CT600 boxes where a possible discrepancy has been identified. The boxes which could be affected are:
- 805 and/or 810 UK property business losses – section 102 Corporation Tax Act 2010
- 830 and/or 835 non-trading losses on intangible fixed assets – section 104 Corporation Tax Act 2010
- 850 and/or 855 management expenses – section 103 Corporation Tax Act 2010
HMRC have also written to the companies’ representative agents to make them aware of the situation. HMRC have only contacted agents whose clients may be impacted.
For confidentiality reasons HMRC cannot disclose specific providers that are affected, but it should be noted that this issue only affects around 5% of software providers. Most providers have not encountered any problems, and those impacted have been contacted directly to address the inconsistencies identified.
What HMRC are doing
In broad terms, HMRC will rely on the tax computations as the accurate position for the companies' losses. HMRC advise that that no corrective action is required from customers, unless they disagree with HMRC’s approach. HMRC also advise customers that they should contact their tax adviser as required.
HMRC have told the CIOT that they continually work with software developers to identify potential issues and are always improving their ability to spot these types of issues to prevent them from happening in the first place. This issue has had minimal impact on customers, and they should not need to take any action.
Penalty position
HMRC’s approach seeks the customer's acceptance that the relevant figures within their Corporation Tax computations are the values that they intended to file. In that situation the associated CT600 entry will be disregarded. HMRC have told the CIOT that in all other respects, the relevance of any penalty associated with the return filed will be determined on the individual facts and circumstances of each case, in line with HMRC’s standard procedure.
Sample copies of the letters to both customers and agents are provided below.