June 20, 2014
UHY Hacker Young found that 286,000 businesses received a corporation tax rebate in the year to March 31 2013 – equating to an average refund of more than £16,000 each.
According to UHY Hacker Young, refunds can become due if companies that pay in instalments based on their projected profits for the year undershoot those predictions. They can also become due if a company has incurred losses that can be off-set against earlier profits or where taxable profits have been reduced due to capital investment.
However, UHY Hacker Young says repayments can take up to two years to be paid – although two to three months is typical. It also said that SMEs could be eligible to claim a research and development (R&D) tax credit if they have not made a profit during the relevant period.
Roy Maugham, tax partner at UHY Hacker Young, said, "UK businesses are still finding that they are overpaying their corporation tax in the billions of pounds. It shows how important it is for companies to regularly review any overpayment of tax as HMRC will not be looking to see if they owe them money."
Slow repayment is putting pressure on small businesses, said Roy Maugham. "Given that the number of rebates has been falling in the last few years, HMRC should be getting quicker but this doesn't seem to be happening in reality. It's not unheard of for some [companies] to simply fold under the pressure in the meantime, as cashflow dries up."
He added: "Companies have a difficult line to tread when it comes to accurately predicting their performance for the year ahead. If they underestimate their profits, HMRC will charge them interest on the difference underpaid. Overestimate profits and they could be handing over large amounts of tax unnecessarily to HMRC which will then have to be recovered."
The number of approved claims for corporation tax refunds is down 17% on 2011/12 when there were 346,000. There were 386,000 in 2010/11.