Repayments of corporation tax – HMRC guidance updated

HMRC has reviewed and updated its guidance in respect of when a company can seek an early repayment of corporation tax.  This may be of interest for companies who are accumulating unprecedented losses in their current accounting period due to COVID-19.

Repayment of normal corporation tax payments

HMRC has reviewed and updated its guidance at CTM92090 regarding when a company can seek repayment of corporation tax before a liability is finally established.

Corporation tax that has been paid before the normal due date (i.e. nine months and one day after the end of the accounting period) is repayable up until that normal due date without pre-conditions.

Under S59DA TMA 1970, a company can also seek repayment of excess corporation tax after the normal due date where:

  • the circumstances of the company have changed and
  • it has grounds for believing that it has paid too much tax and
  • its liability for the accounting period has not been finally established,

The updated guidance sets out that HMRC may consider a s59DA claim made in respect of tax paid for an accounting period (AP1) before the end of a subsequent accounting period (AP2) in exceptional circumstances.  These include, for example, where the expected allowable tax losses for AP2 will be so great that they are likely to comfortably exceed any relevant income in AP2 and the amount of taxable profits of AP1.  Claims should take into account how much of AP2 has expired, any possible upturn in revenue and any other factors that may affect the ultimate loss position of the company. 

As set out in the updated guidance, companies will be expected to provide HMRC with detailed supporting evidence in order to make such a claim.

Quarterly instalment payments

HMRC has also reviewed and updated its guidance at CTM92650 on early repayments of quarterly instalment payments. 

This means that companies can, in exceptional circumstances, make earlier claims for repayment of their instalment payments for an accounting period.

Regulation 6 of the Corporation Tax (Instalment Payment) Regulations (SI1998/3175) allows for companies to make a claim where, due to a change in circumstances, they believe their liability is likely to be less than previously calculated. A revised calculation of that liability may take into account anticipated losses of the current accounting period that has not yet ended. Companies will need to provide full evidence to support these claims.

The updated guidance provides examples of the supporting evidence that would be required to make a claim.