Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

COTAX Manual

From
HM Revenue & Customs
Updated
, see all updates

Assessing: CTSA assessments: revenue determinations

This subject is presented as follows

Determination of tax payable when no return delivered in response to a notice
For which periods can you make a revenue determination?
What will a determination determine?
Time limit for making a revenue determination
Review of cases for revenue determination
Determination where the notice to deliver is partly complied with
Instalment payments
Company’s self assessment supersedes a revenue determination
Stranded revenue determinations

Determination of tax payable when no return delivered in response to a notice

If a company fails to deliver a company tax return in response to a notice to deliver, you may determine the amount of tax payable by the company to the best of your information and belief. This is a revenue determination under Paragraph 36 Sch 18 FA1998. You make the determination at any time after the filing date (Word 42KB), if that date is ascertainable (Word 44KB).

If you cannot ascertain the filing date, you can only determine the company’s tax liability 18 months after the end of the specified period in the notice to deliver or three months after the day on which the notice to deliver is served, if that is later.

In practice, we normally review cases for determination 18 months after the end of the actual or assumed accounting date. But you may need to make a determination before then if you can ascertain the filing date if, for example, you believe that there would be a risk of loss of tax if no immediate action was taken or the company is a member of a group, and the failure to deliver the return prevents a proper review of other companies in the group.

For which periods can you make a revenue determination?

If you know of one or more APs ending within the specified period you can make a determination for each one that has an outstanding return.

If you are not sure what the company’s APs are, you can make a determination for whatever period or periods that you decide on, ending in the specified period.

When you use function RAMA (Record / Amend Assessment) to make the determination, notice of the determination is served on the company and shows the date of issue.

What will a determination determine?

The power to make a determination enables you to determine any amounts included in the calculation of tax payable for an AP and that form part of the calculation of any of those amounts.

It may also be accompanied by a notice under Paragraph 38(2), determining the dates on which amounts of tax are payable. For more information, see ‘instalment payments’ below.

Normally, a revenue determination:

  • includes an estimated amount of profits and may include estimated amounts of particular types of profit
  • may contain relief for losses, deficiencies and other amounts brought forward from a previous AP
  • indicates the rate, or rates, at which tax is estimated to be due.

You should avoid making a revenue determination that includes only S455 CTA 2010 liability (close company loans to participators). If you do so and subsequently agree that the company does not need to submit a return, COTAX may not allow you to reduce the revenue determination to nil.

Top of page

Time limit for making a revenue determination

You can make a revenue determination up to three years from the day on which you could have first exercised the power to do so. The determination has effect as if it was a self assessment, unless and until the company delivers its return and self assessment within the relevant time limit.

Top of page

Review of cases for revenue determination

You routinely review cases for a determination at the tax-related penalties stage, normally 18 months after the end of the AP.

COTAX identifies those cases and puts them onto the Determination Required No Return List (DRNR) work list. You work the cases from that list and use function RAMA (Record / Amend Assessment) to make the revenue determination, or to indicate on COTAX that no determination is required. At the end of function RAMA, COTAX gives you the following options regarding penalties:

  • allow the automatic issue of penalties
  • proceed to function PPEN (Prepare Penalty Determination) to issue or revise the penalty determination
  • set the ‘no penalty required’ indicator.

You should normally select the automatic issue of penalties option.

When you have taken action on both the tax and penalty determinations, COTAX automatically deletes the relevant entry from the work list. If you choose the option of allowing COTAX to issue the penalty automatically, the work list entry is deleted 14 days later, when the automatic issue takes place.

See:

  • COM22000 for more information on the DRNR work list
  • COM100000 onwards for more information on penalty determinations.

Top of page

Determination where the notice to deliver is partly complied with

If a company delivers a tax return for an AP ending within the period specified in a notice to deliver and you think that there is or may be an outstanding period (Word 28KB) for which the company has not made a return, you may determine the amount of tax payable by the company for the outstanding period to the best of your information and belief.

If you can ascertain the filing date for the outstanding period, you can do that at any time after the filing date.

If you cannot ascertain the filing date for the outstanding period, you can do it after the later of:

  • 30 months after the end of the period specified in the notice to deliver
  • three months after the day on which the notice is served.

While legislation does not prohibit you from making a determination for more than one period, it does not consider that you will do so. You should therefore normally make only one revenue determination at a time, in relation to any one specified period.

When you use function RAMA (Record / Amend Assessment) to make the determination, notice of the determination is served on the company and shows the date of issue.

Top of page

Instalment payments

Paragraph 38(2) Sch 18 FA1998 provides that a notice of revenue determination may be accompanied by a notice determining the dates on which amounts of tax become due and payable under Sections 59D or 59E TMA 1970. The Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998 No. 1975) identify the companies that are required to make instalment payments. They do not refer to, or contain any procedural rules for determining the company’s status in the absence of a return. COTAX does not have a facility to issue a determination that tax is payable in instalments.

Liability to make instalment payments is normally established from the company’s return. However, in some cases, you may need to determine that the tax charged by a revenue determination should have been paid in instalments.

This is the case where the profits you are charging in the determination exceed unrestricted upper limit, the tax liability is above the statutory de minimis and it is clear that the company cannot benefit from the ‘newly large’ provisions.

Some cases may be less clear cut, such as where a company with smaller estimated profits is known or believed to have a large number of 51 per cent companies.

In such cases you need to do the following.

  • Set the ’quarterly instalment payment’ signal to ‘Yes’ on screen COT121G in function RAMA. See COM80000 onwards for the interest consequences of setting the ‘quarterly instalment payment’ signal.
  • If appropriate, make a determination that tax is payable in instalments by entering a free format message field in function RAMA such as ‘Para 38(2) Sch18 FA 98 - the tax charged is payable by instalments on the dates provided by regulations made under S 59E TMA 70’.

Such a determination will be displaced if the company delivers a return containing information showing that the instalment payment provisions do not apply.

For more information about instalment payments, see the Company Taxation Manual (CTM) at CTM92505 onwards, and COM95000 onwards.

Top of page

Company’s self assessment supersedes a revenue determination

The company does not have a right of appeal against a revenue determination, but can supersede it with a self assessment by making a return within three years from the day on which the determination could first have been made or 12 months from the actual date of the determination, if that is later.

If the company delivers a return for any AP ending in the period specified by the notice to deliver, the self assessment contained in that return supersedes the determination.

However, one self assessment can only replace one determination. If, exceptionally, we have made revenue determinations for more than one period ending within the period specified in the notice to deliver, the self assessment replaces the determination made for the period most closely matching the period covered by the return. The other determinations stand, unless and until the return is received for each relevant AP.

If a return is logged for the wrong period, unlogging the return reinstates the revenue determination.

If the company can demonstrate that there is no AP ending in the period specified by the notice to deliver for which, or for part of which, we have made a determination, or that it has delivered the necessary return or returns, or that the return is not yet due, the determination becomes of no effect. You then need to use function RAMA to reduce the determination to nil.

Top of page

Stranded revenue determinations

A revenue determination may become stranded, that is, stored without a link (Word 30KB), in some circumstances. It is most likely to happen in cases where the company has told you nothing of its accounting intentions. See stranded revenue determination Example 1 (Word 35KB)

COTAX does not alert you to the stranded determination when a return is logged. Caseworkers should consider the possibility of a stranded determination in any case where determinations have been made and the AP record is subsequently changed. For more information see COM1000 onwards.

See:

  • COM23011 for a list of forms relevant to this subject
  • COM23012 for a list of functions to use in particular situations
  • COM23013 for legislation applying to this subject.