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HMRC has outlined when companies can make claims for repayments of Corporation Tax based on anticipated losses.

They have recognised the unprecedented losses that many industries such as hospitality, tourism and aviation have accumulated in their current accounting periods due to the coronavirus pandemic.

In exceptional circumstances, HMRC will consider claims for repayments of Corporation Tax for prior periods based on anticipated losses before end of the current accounting period.

Repayment of quarterly instalment payments (QIPs)

Companies will be required to provide evidence to substantiate claims and support any expected losses. They will need to demonstrate that the losses are so substantial that they will comfortably shelter any income of the current period and the taxable profits of the prior period relevant to the claim.

HMRC’s guidance states that: “It will be extremely difficult for a company to provide adequate evidence during the earlier part of its accounting period.” This is because when the date of the claim is further into the accounting period, there is a smaller chance of any recovery of losses and less reliance on forecasts.

Repayment of Corporation Tax (paid on the normal due date for payment)

HMRC has also provided guidance regarding repayment of corporation tax made on the normal due date for payment (usually nine months and one day after the accounting period ends). A company can make a claim to repayment of Corporation Tax paid based on an anticipated loss in the current accounting period which has not concluded, but must provide substantial evidence to support their claim.

The types of information which would be useful for claimants to provide to substantiate their losses as part of any claim include:

  • Revised profit and loss forecasts.
  • Management accounts and draft tax computations.
  • Detailed reasoning and assumptions behind any figures submitted.
  • Reports from the Board of Directors and any public statements made concerning the company’s trading position.
  • Documents which have been shared with regulatory or financial institutions or confirm that these are the same forecasts used for internal planning purposes.
  • Confirmation that the company is not expecting any exceptional income or gains in the existing accounting period.
  • External evidence which supports the fact that the issues involved are unlikely to be resolved in the short term – this could include sector or industry commentary.

For more information about repayments of Corporation Tax, please contact Ann Bibby on abibby@ellacotts.co.uk or 01295 250401.