ICAEW.com works better with JavaScript enabled.

TAX NEWS

HMRC finds discrepancy in company losses reported

Article

Published: 06 Dec 2022 Update History

Letters were sent to companies, agents and software providers last month, highlighting a discrepancy in some cases between the figures in companies’ computations and tax returns. Unless the taxpayer or agent requests otherwise, HMRC will use the figures in the computation as the filed position.

HMRC has identified inconsistencies relating to losses reported in the company tax return (CT600) and computations filed by some companies. The differences arise because of the change in the carried forward loss rules from 1 April 2017 and concern entries relating to:

  • Non-trading losses on intangible fixed assets (boxes 830 and 835)
  • UK property business losses (boxes 805 and 810)
  • Excess management expenses (boxes 850 and 855) 

These boxes should only include the loss arising in the current period, but the tax software used by some companies has also been including brought forward amounts.

HMRC has written to companies with entries in the affected CT600 boxes where a possible issue has been identified. HMRC has only contacted agents whose customers may be impacted but have not specified individual clients who are affected. HMRC expects companies to contact their agents directly to discuss the position.

In broad terms, HMRC will rely on the tax computations as the accurate position for the companies' losses for the period. Companies should not need to take any action unless they disagree with this approach. If necessary, companies or their agents should contact HMRC within 60 days of the date of issue of the letter to advise that they disagree.

ICAEW’s Tax Faculty has asked HMRC to confirm what the penalty position is in situations where, for example, such a discrepancy has not been picked up by HMRC or the company and the wrong amount of losses have been treated as carried forward.

HMRC has reiterated that its approach seeks the taxpayer's acceptance that the relevant figures within their corporation tax computations are the values that they intended to file. In that situation, the associated CT600 entry will be disregarded. However, it has advised that in all other respects, the relevance of any penalty associated with the return filed will be determined on the individual facts and circumstances of each case, in line with HMRC’s standard procedure.   

The Tax Faculty

ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

More support on tax

ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.

Sign up for TAXwireJoin the Tax Faculty

More from the Tax Faculty

Latest news
Making tax digital image
TAXwire

Stay up to date with the latest developments in tax by signing up to the Tax Faculty's weekly enewsletter

Practical guidance
Cover
TAXline

Comprehensive support for Tax practitioners each month from the Tax Faculty and expert contributors.

Technical support
Tax Faculty image
Webinars

Expert advice from the Tax Faculty's technical managers on all the developments in tax policy and practice.