Potential tax return trouble for DIY companies

HMRC has dropped its old, free-to-use corporation tax account filing system. Unfortunately, the new version has limitations which means you might not be able to use it. What’s the full story?

In the process of forcing all taxpayers to manage their tax affairs digitally, HMRC has been working on new tax return software for companies and organisations which pay corporation tax (CT). For a while this has run alongside the old system, but is no longer available.

The new version is simpler to use and has the option to file the company’s accounts (which is a part of the CT tax return process) simultaneously with Companies House. However, the types of company allowed to use the new system are currently limited.

HMRC’s list of exclusions, updated on 31 May 2017, is long and wide-ranging, so many small companies will be prevented from using the software. For example, the exclusions include companies with a turnover exceeding £632,000, those with significant investment income, e.g. property rental, and those where a loan to a participator, such as a director’s loan account, has been repaid more than nine months after the end of an accounting period.

For those wanting to use HMRC’s online system, the advice is to check the list of exclusions well in advance of the deadline for submitting the CT return. If a company is excluded, it will be necessary either to purchase commercial software (this starts at around £50 – search for “CT600 software” online) or pay an accountant to do it.

Whilst not on HMRC’s list, because of changes included in the abandoned part of the Finance Bill 2017, if the submission is for a CT return for an accounting period ending after 1 April 2017, which includes carried forward losses set against total company profits, it will be necessary to wait until HMRC updates its software in October 2017.

This story was brought to our attention by our colleagues at Xecutive Search.

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