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HMRC internal manual

COTAX Manual

HM Revenue & Customs
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Background: company taxation overview: the CTSA and CT pay and file regimes

This subject is presented as follows.

CT Self Assessment
CT Pay and File

CT Self Assessment

CT Self Assessment applies to APs ending on or after 1 July 1999.

The current process, briefly, is as follows.

  • A notice to deliver a company tax return is issued.
  • The company makes a return that includes a self assessment of the tax due.
  • The return must be submitted through the CT Online Service for the vast majority of companies and include accounts and computations in iXBRL format.
  • HMRC has the right to correct obvious mistakes in the return, such as arithmetic errors, but in practice the validation in the CT Online Service prevents customers making many such errors.
  • If the company does not submit a return, HMRC issues a revenue determination that can be displaced only by the submission of a return.
  • HMRC has an explicit right to enquire into the completeness and accuracy of any company tax return.

Under the Corporation Tax Self Assessment (CTSA) regime the following apply.

  • Responsibility for assessing a company’s tax liability lies with the company itself.
  • Every company tax return must include a self assessment.
  • The delivery of a return creates a legal charge, without further action by HMRC.
  • HMRC has a fixed period of at least 12 months to decide to enquire into the return, and has the right to enquire into any return.
  • Finality comes by the passage of time, or following the formal closure of an enquiry.
  • The definition of ‘tax’ within the scope of the self assessment provisions includes the special tax charges, assessable as if they were CT, on:

    • loans by close companies to their participators (S455 CTA 2010)
    • controlled foreign companies (Section 747 ICTA 1988).

    These charges are self-assessable, and are included within a single tax liability. See COM53100 and COM151200 for more information.

  • The tax charge on controlled foreign companies (S747 ICTA 1988) is included in a company tax return. S747 tax is part of the calculation of tax payable by the company in its self assessment, under Para 8 Sch 18 FA 1998. For further information on controlled foreign companies see the International Manual at INTM200000 onwards.
  • S455 CTA 2010 liabilities must be included in a company tax return. S455 tax is part of the calculation of tax payable by the company in its self assessment.
  • Any negative figures (including capital losses) that are required to be included in a return become final with the return.
  • Companies whose profits exceed the upper limit - currently, £1.5M annually for a company with no 51 per cent companies - have to make instalment payments of tax. For more information see COM95000 onwards.
  • The quarterly instalment payment provisions bring with them an entitlement to credit interest for companies that pay tax before the normal due date (Word 49KB), but credit interest applies to all companies, not just those affected by quarterly instalment payments.
  • Credit interest and interest paid on repayments of tax are taxable, and interest charged on tax paid late is tax-deductible.
  • The company must make payment nine months and one day after the end of the AP.

This regime differs from the previous regime in that under CT Pay and File the company made payment only after the Inspector had raised an assessment.

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CT Pay and File

CT Pay and File applies to APs ending on or after 1 October 1993.

The process, in brief was as follows.

  • A notice to deliver a return was issued.
  • The company made a tax return.
  • The return charge was recorded on the COTAX system.
  • An inspector reviewed the information in the return and, if satisfied, made an assessment based on it.
  • Function SRTN (Screen Return) had to be used before the assessment was made using function PASR (Prepare Assessment Based on Return).
  • If the inspector was not satisfied with the return, or a return was not received, he or she made an estimated assessment to the best of their judgement using function PEST (Prepare Estimated Assessment).
  • The company could then appeal against the assessment if they wanted to displace the inspector’s estimated assessment with a more accurate figure of the tax due.
  • The inspector used function PAST (Prepare Assessment) to amend the assessment.
  • If an inspector was not satisfied with a return, the requirement that he or she should make an assessment ‘to the best of their judgement’ could be used as the basis for asking questions of a taxpayer to inform that judgement.
  • The inspector had to make separate CT determinations of trade losses and amounts relievable as group relief.
  • The company had to make the required payment nine months and a day after the end of the AP.

See COM30021 for legislation applying to this subject.