CT Return 1 and 2: Filing and Penalties

Question 1

What documents must be included in a company’s CT return?

CT Return 1: Chapter 1

Answer 1

CT603 will request what is “reasonably required”

1. CT600 (Tax form)
2. Any supplementary pages requried (CT600A to CT600J)
3. Copy of full accounts for the period to which the CT600 relates, plus directors’ report and auditors report (unless small/dormant then exempt) (BUSINESS ACCOUNTS)
4. Computations that make clear how the return figures are calculated from the relevant figures in the accounts (linking papers from GAAP > HMRC CT)

HMRC does not accept abbreviate accounts that can be given to COMPANIES HOUSE

The company P&L may include depreciation. CT computations will show addbacks. Companys can however claim Capital allowances on PMA

Or tax laws that might be included: Capital Gains

Question 2

Brown Ltd files its CT return for the AP to 30 June 2019 online on 17 March 2020.
1) By what date must it pay any corporation tax due
2) How must the payment be made? And when?

CT Return 1: Chapter 1

Answer 2

Corporation tax is payable 9 months and 1 day after the end of the AP for most companies (there are different rules for large companies). Brown Ltd must therefore pay any

1) CT due by 1 April 2020;
2) From 1 April 2011 all payments must be made electronically. 9 months and 1 day after accounting period (or earlier if instalments)

Question 3

In what format are the following categories of company required to submit their accounts and computations to HMRC?

1) Small companies. Exceptions to this?
2) Unincorporated Charities, Clubs and societies?
3) Insolvency companies in liquidation/winding up

Answer 3

1) From 1 April 2011:
Accounts: iXBRL
Computations: iXBRL
There are limited exceptions (dormant or non-UK resident w/ permanent establisment in UK)

2) Unincorporated charities:
Accounts: iXBRL or PDF
Computations: iXBRL

3) Not required to file online, so can be paper

Note: if in iXBRL format then it’s being filed online

Question 4

1) What are the company’s four APs over the period of trading?

Easy Street Ltd trades from
* 1 May 2018 to 7 February 2021.
* It has no source of income before it starts to trade.

The company draws up accounts for the following periods.
* 1 April 2018 to 31 July 2019
* 1 August 2019 to 31 July 2020
* 1 August 2020 to 29 February 2021

Answer 4

FIRST AP: is from when the business starts trade, not from when it is incorporated, so:

FIRST AP-
01 May 2018 - 30 April 2019 (12 months from trade)

SECOND AP-
01 May 2019 - 31 July 2019 (4 months - to the date which the accounts have been prepared)

THIRD AP
1 August 2019 to 31 July 2020

FOURTH AP
1 August 2020 to 29 February 2021

Question 5

What are the company’s first three APs?

Easy Street No2 Ltd has no activities until it opens a pizza parlour on the High Street on 15 June 2019. The company makes up accounts to 31 May 2020, and then to 31 October 2021, since this date is more convenient.

Answer 5

What are the company’s first three APs?

The first AP is from 15 June 2019, the start of trading, to 31 May 2020, the date to which accounts have been prepared.

The second AP is from 1 June 2020, the day following the end of the first AP, to 31 May 2021, 12 months later.

The third AP runs from 1 June 2021, the day following the end of the second AP, to 31 October 2021, the date to which accounts have been prepared.

Question 6

What is the difference between
1) accounting period (AP) and
2) A period of account?

Answer 6

An accounting period is the period, of no more than 12 months, for which the company is charged to CT.

A period of account is the period, of up to 18 months, for which the company’s accounts have been prepared. A company produces financial accounts to meet the requirements of the Companies Act.

Question 7

In each of the following situations, state the filing date of the company tax return.

a. 12 month AP to 31 March 2019, notice served 20 April 2019.

b. 16 month period of account to 30 June 2019, notices served 26 July 2019 for the APs covering the period of account.

c. 12 month AP to 31 March 2019, notice served 11 January 2020.

Answer 7

a. 12 month AP to 31 March 2019, notice served 20 April 2019.
31 March 2020 – 12 months after the end of the AP.

b. 16 month period of account to 30 June 2019, notices served 26 July 2019 for the APs covering the period of account.
30 June 2020 – 12 months after the end of the period of account. Note that as this is a long period, the two returns would be caught in practice by two separate notices.

c. 12 month AP to 31 March 2019, notice served 11 January 2020.
11 April 2020 – 3 months after the ‘late’ notice was served.

Question 8

Give two reasons why the filing date is significant (There are 4 reasons)

Answer 8

1) late filing penalties
2) deciding when to make a tax determination
3) the time limit for opening a compliance check (in some cases)
4) the time limit for company amendments to the CT return.

Question 9

TRUE OR FALSE?

1. A company that has not been served with a notice to deliver a company tax return does not have to submit a return.
2. When a company becomes active it must tell HMRC.
3. The company’s first AP starts when it incorporates
4. A company buys a property 01 April 2020. It’s first AP starts on this date

Answer 9

1. A company that has not been served with a notice to deliver a company tax return does not have to submit a return. TRUE
2. When a company becomes active it must tell HMRC. TRUE
3. FALSE The company’s first AP starts when it comes within the charge to CT. It does so when it acquires a source of income.
4. FALSE PROBABLY - The company simply owns a business asset, not a source of income.

Question 10

Other:
The company will be charged interest on tax paid late and will receive ‘credit’ interest if it pays its tax early.

Question 11

CT interest: when is this due?

Answer 11

The company will be charged interest on tax paid late and will receive ‘credit’ interest if it pays its tax early.

Companies defined as large for the purposes of paying CT must pay by quarterly instalment payments (QIPs).

Question 12

Whats iXBRL

Answer 12

Inline eXtensible Business Reporting Language (iXBRL).

Question 13

Who authorises the return?

Answer 13

There is a declaration as part of the return to confirm it is correct and complete.

If submitted by an agent on behalf of a company, they must first get the company director(s) to approve the return, accounts and computation.

When company returns were paper documents, a person authorised by the company for the purpose had to sign a declaration that the information given in the return was correct and complete to the best of their knowledge.

Question 14

What legislation is at play for a return?

Answer 14

1) Corporation Tax Act 2009 (CTA09).
2) Schedule 18 Finance Act 1998

Question 15

When does a company’s AP come to an end?

Answer 15

On the first occurence of:

• The end of 12 months from the beginning of the AP.
• The end of a company’s period of account.
• The company ceases to trade (or starts).
• comes within or ceases to be chargebale to CT
• End of periods where there are missing accounts
• The company entering administration.

Example: A deposit into the business’ bank account starts to accrue interest. Interest is taxed on the accruing basis, so it accrues from the first deposit

Question 16

When is the filing date for a return?

Answer 16

The filing date for a return is the latest of
* 12 months from the end of the period for which the return is made
* 3 months after the date on which the notice to deliver a company tax return is served
* if the period of account is not longer than 18 months, 12 months from the end of that period
* if the period of account is longer than 18 months, 30 months from the beginning of that period.

Question 18

What Penalties may be due to a company?

Answer 18

Failure to Notify Chargeability : fails to notify chargeability for an AP within 12 months of the end of the AP. The penalty is based on the tax unpaid 12 months after the end of the AP

Penalties for a late return: Flat-rate. Increased after 3rd and subsequent instances of failing to file

Question 19

1. What is the CT Financial year?
2. What is the fiscal year?

Answer 19

Some companies may choose to draw up accounts to 31 March each year, as this coincides with the CT financial year (FY)

This is also close to the fiscal year, which ends on 5 April

Question 20

When does an AP start?

Answer 20

1) Immediately after the end of the company’s previous AP, if the company is still within the charge to CT, or
2) Comes withing the charge to CT (note if incorporated and not started trading, they’re not within CT, UNLESS receiving interest from

Example:

Easy Businesses Ltd is incorporated on 16 March 2019. It has no source of income until 13 April 2019, when it opens a bank account and begins to receive interest. It starts to trade as a confectioner on 6 May 2019. Its first period of account runs from the date of incorporation, 16 March 2019, to 31 August 2020.

The company’s APs start or end as follows.

The company is not within the charge to CT from 16 March 2019 to 12 April 2019 because it does not have a source of income. So, the first AP starts on 13 April 2019, when the company acquires a source of income, the bank account, and becomes active. (Although a bank account may not actually yield any interest for many months, the interest is taxed on the accruing basis, so it accrues from the first deposit).

The second AP starts on 6 May 2019 when the company starts to trade. The first AP ends immediately before the start of the second AP, and therefore, ends on 5 May 2019.

Question 21

true of false: AP for trade start and interest from bank are the same

Answer 21

FALSE Interest is considered a source of income. Starting to trade at a later date will incur a different AP.