HM Revenue & Customs clarifies repayments of Corporation Tax and anticipated losses

With businesses across many sectors having been hit hard by the Coronavirus crisis, HM Revenue & Customs (HMRC) has now said it will, in exceptional circumstances, consider claims for Corporation Tax repayments for prior periods based on anticipated losses, even before the conclusion of the current accounting period.

The clarification came in an update to HMRC’s internal Company Tax Manual.

Repayment of Quarterly Instalment Payments (QIPs) will require companies to submit evidence in support of claims and to demonstrate the amount of the losses they expect to incur.

Similar measures are in place in respect of the repayment of Corporation Tax paid on the normal due date for payment, which tends to be nine months and one day following the end of the accounting period.

The guidelines make clear that repayments will only be made in exceptional circumstances and that claims will be made based on the specific circumstances of each application.

While certain sections of the guidance are redacted, the Institute of Chartered Accountants in England and Wales (ICAEW) suggest that businesses provide the following information to HMRC in support of an application:

  • Up-to-date profit and loss forecasts
  • Management accounts and tax calculations
  • Details reasoning and assumptions underpinning the figures submitted
  • Reports from the Board of Directors and public statements concerning the company’s trading position
  • Evidence that the forecasts submitted are the same as those used for internal planning
  • Confirmation that the company does not expect exceptional income or gains during the current accounting period
  • External evidence demonstrating the circumstances involved are unlikely to change in the short term.

The issues involved in claiming repayments of Corporation Tax are complex and the evidence requirements are stringent, meaning the seeking of professional advice in advance of any claim is vital.