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Overpayment of corporation tax in light of COVID-19

Caroline Fleet, Partner, Corporate Tax
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With the onset of coronavirus (COVID-19), companies are busy assessing the full financial impact of this pandemic on the profitability of the group.  This will obviously then determine the corporation tax due.  For large and very large corporates they are likely to have already paid over a significant proportion of their corporation tax for the year under their respective Quarterly Payment regimes, based on originally projected higher profits. 

Where the revised profits are now substantially reduced because of COVID-19 and the corporate group is part way through its financial year, it is possible to take into account these lower projected profits in the subsequent quarterly payments. If the group has paid too much under the regime (or should not have made a payment at all), the group can then claim back this overpayment back from HMRC. If a claim is not required to have this repaid, HMRC will deduct the overpayment from future installments. In the current environment where businesses are looking for any cash to sustain them through the crisis, a repayment of this overpaid corporation tax will be welcome and engagement with HMRC should be made as soon as possible.

For smaller businesses, HMRC has already announced a helpline to help support those who are unable to pay tax due to the impact of COVID-19. HMRC can agree to revised installment arrangements, suspending debt collection proceedings as well as cancelling penalties and interest relating to administrative difficulties contacting or paying HMRC immediately. Based on our experience of similar helplines, over time HMRC are likely to request evidence to support the claims such as revised business plans, evidence of other fund raising considered by the company, such as bank finance and shareholder funding, in assessing the appropriateness of the revised payment arrangements. 

For all businesses, the key will be presenting the revised business plans to HMRC in a timely manner in order to receive a refund of overpaid tax or to agree delays in the payment of the tax due.

If you would like any assistance in understanding or managing the corporation tax obligations of your business please do contact your local Crowe tax team.

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Caroline Fleet
Caroline Fleet
Head of Real Estate