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Reasonable excuse for filing a late interest restriction return

8 December 2020: Where the majority of firms in a corporate interest restriction group have obtained a deferral of late filing penalties for company tax returns, the group may have a reasonable excuse for filing an interest restriction return late, confirms HMRC.

The usual filing deadline for an interest restriction return (IRR) is 12 months from the end of the period of account. This is normally the same filing deadline as the company’s corporation tax return. In both cases, although HMRC does not have discretion to provide any extension to the statutory filing deadline, no late filing penalty will be chargeable, thanks to provisions to be included in Finance Bill 2020-21 with retrospective effect, where the reporting company has a reasonable excuse for missing the deadline, and the return is filed within a reasonable time after the reasonable excuse ends.

ICAEW’s Tax Faculty has previously reported that HMRC has suggested that delays caused by the late filing of company accounts and other reasons associated with the coronavirus pandemic could constitute a reasonable excuse for failing to file a corporation tax return by the statutory deadline.

Although an IRR may be filed using estimated figures, the figures included in the IRR are usually based on individual company tax results. As such, HMRC has confirmed to ICAEW and other representative bodies that it will accept that there is a reasonable excuse for filing the IRR late where the majority of companies within a CIR group have obtained a deferral to late filing penalties for their company tax returns and the IRR is filed by the same agreed date.

However, HMRC has also reminded companies that it will take into account all relevant facts and circumstances when considering if there is a reasonable excuse for late filing of the IRR.

If a reporting company is unable to file the IRR by the statutory deadline, it should contact its Customer Compliance Manager (CCM) if it has one. If the group does not have a CCM, and it considers that it has a reasonable excuse for filing the IRR late, the Tax Faculty advises that it should include this information when it files the IRR. HMRC can then take account of this before any late filing penalty is issued.

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