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.
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