1. Make sure the company has a corporation tax Unique Taxpayer Reference (UTR)
HMRC has automatically registered companies currently submitting income tax returns to report their UK rental income but the companies may not have received the letters containing their new UTRs. Now is the time to contact HMRC to ask for confirmation of the new UTR. Companies should not wait until they have to file a return or make a corporation tax payment.
2. Submit a new agent authorisation
Where companies have an agent dealing with their income tax returns, the existing agent authority (form 64-8) does not extend to corporation tax. A new form will have to be submitted before HMRC will speak to the agent about the company’s corporation tax or allow them to file the company’s corporation tax returns. This should be done as soon as possible because, without an appointed agent, HMRC will send all post to the company’s overseas registered office address, which is likely to result in delays. Where this involves time sensitive authorisation codes, this could mean that the code expires before it is received.
3. Confirm the company’s accounting date
Unless a company already prepares its accounts to 5 April and is happy to continue to use this date, it will be necessary to tell HMRC the company’s accounting date. This date will determine the deadlines for filing its corporation tax returns and paying its tax.
4. Understand the new due dates for filing and payments
A company has 12 months from its accounting date to prepare and submit its corporation tax return but only 9 months and a day to pay its corporation tax liability. For companies preparing their accounts to 5 April or 31 March, this will bring forward the payment of the final tax liability for the year by a month, while allowing an extra 2 months to file the return, compared to income tax. In practice, it makes sense to prepare the return within 9 months of the year end so that the correct amount of tax can be paid on time.
Companies with taxable profits in excess of £1.5 million will be required to pay their corporation tax liabilities in quarterly instalments for their second and subsequent accounting periods. For groups of companies, this threshold is divided by the number of companies in the group, so bringing companies with much lower profits into quarterly instalments. Their first instalments will be due 6 months and 13 days after the start of the relevant accounting period where profits are below £20 million. This date is advanced to just 2 months and 13 days after the start of the accounting period if profits exceed £20 million. If the accounting date falls within the first half of the tax year, an affected company will already be within its second corporation tax accounting period and its first quarterly payment may already be due.
5. Arrange for the company accounts to be prepared in the required format
The company’s corporation tax return must be filed online, together with accounts and computations in eXtensible Business Reporting language (iXBRL) format. The accounts will have to be prepared under UK-IFRS or UK-GAAP or local accounting standards of the country of incorporation. If a company does not already prepare accounts to this standard, it will be necessary to adjust the company’s accounting without delay.
6. Check how the tax liabilities will change
While the headline tax rate will fall from 20% to 19%, for many companies the taxable profits for corporation tax will be calculated quite differently to income tax. This will include restrictions on the deductibility of rental losses and interest charges in some cases. We go into this in more detail in our previous article here.
1. Make sure the company has a corporation tax Unique Taxpayer Reference (UTR)
HMRC has automatically registered companies currently submitting income tax returns to report their UK rental income but the companies may not have received the letters containing their new UTRs. Now is the time to contact HMRC to ask for confirmation of the new UTR. Companies should not wait until they have to file a return or make a corporation tax payment.
2. Submit a new agent authorisation
Where companies have an agent dealing with their income tax returns, the existing agent authority (form 64-8) does not extend to corporation tax. A new form will have to be submitted before HMRC will speak to the agent about the company’s corporation tax or allow them to file the company’s corporation tax returns. This should be done as soon as possible because, without an appointed agent, HMRC will send all post to the company’s overseas registered office address, which is likely to result in delays. Where this involves time sensitive authorisation codes, this could mean that the code expires before it is received.
3. Confirm the company’s accounting date
Unless a company already prepares its accounts to 5 April and is happy to continue to use this date, it will be necessary to tell HMRC the company’s accounting date. This date will determine the deadlines for filing its corporation tax returns and paying its tax.
4. Understand the new due dates for filing and payments
A company has 12 months from its accounting date to prepare and submit its corporation tax return but only 9 months and a day to pay its corporation tax liability. For companies preparing their accounts to 5 April or 31 March, this will bring forward the payment of the final tax liability for the year by a month, while allowing an extra 2 months to file the return, compared to income tax. In practice, it makes sense to prepare the return within 9 months of the year end so that the correct amount of tax can be paid on time.
Companies with taxable profits in excess of £1.5 million will be required to pay their corporation tax liabilities in quarterly instalments for their second and subsequent accounting periods. For groups of companies, this threshold is divided by the number of companies in the group, so bringing companies with much lower profits into quarterly instalments. Their first instalments will be due 6 months and 13 days after the start of the relevant accounting period where profits are below £20 million. This date is advanced to just 2 months and 13 days after the start of the accounting period if profits exceed £20 million. If the accounting date falls within the first half of the tax year, an affected company will already be within its second corporation tax accounting period and its first quarterly payment may already be due.
5. Arrange for the company accounts to be prepared in the required format
The company’s corporation tax return must be filed online, together with accounts and computations in eXtensible Business Reporting language (iXBRL) format. The accounts will have to be prepared under UK-IFRS or UK-GAAP or local accounting standards of the country of incorporation. If a company does not already prepare accounts to this standard, it will be necessary to adjust the company’s accounting without delay.
6. Check how the tax liabilities will change
While the headline tax rate will fall from 20% to 19%, for many companies the taxable profits for corporation tax will be calculated quite differently to income tax. This will include restrictions on the deductibility of rental losses and interest charges in some cases. We go into this in more detail in our previous article here.
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Tax planning and advice for individuals
1
1 April 2020
