Corp Tax Refund

[Contreras]

The £3.78 is held on account until used to offset CT owed this year, but once you do that they'll credit another 2p as interest on the interest. Quite tough if you're OCD about getting things to add up. Now I need an extra tab in the worksheet just for "Bank of Hector" with CR and DR and all that.

I dunno why you binned the cheques. Just pay them into the company account and put it down as interest, as if the account itself paid that interest.

Will HMRC still send a cheque if requested? I presumed there was a tick-box on the CT600 that my accountant didn't check this time round but perhaps it's just the way now.

[TheCyclingProgrammer]

If its just a refund of an overpayment, then in your books your corporation tax account would show the overpayment as a debit balance, e.g.:

Corporation Tax calculated and accounted for:
DR P&L £10000
CR Corporation Tax £10000

The overpayment:
DR Corporation Tax £10500
CR Bank £10500

Corporation Tax account: -£500

Refund received:

DR Bank Account £500
CR Corporation Tax £500

CT Account Balance: £nil

(I think I've got my credits and debits the right way around there).

So in other words it doesn't have any effect on your tax position, its just a refund to your bank account and a bookkeeping adjustment. Unless the refund also includes interest, in which case it might be something like:

Refund + interest received:

DR Bank Account £550
CR Corporation Tax £500 (balance now £nil)
CR Interest Income £50

The £50 would be included in your taxable income.

[WordIsBond]

Yeah, if it is interest, it is interest income. If it is a refund of overpaid tax, it isn't interest income. It isn't even income, really. It's a negative amount in your tax expense column, isn't it?

[pr1]

If it's interest received from HMRC yes as classed as income however if it is a refund of the CT paid (i.e. overpaid the tax) then no.

Ah, ok that makes sense - I assumed in OP's case it was overpayment due to the word "refund", but on reading it again I guess it could be either

[Darren at Fox-Bartfield]

CT Interest

So you need to pay tax on overpaid tax? is that right?!

Say profit is £100
CT due is £80
CT paid is £85
refund received is £5
then you have to pay CT on the £5, so money back in company pocket is £4

so you lose out on 20% if you overpay?

(add three zeros to each number if you want to make it more exciting)

If it's interest received from HMRC yes as classed as income however if it is a refund of the CT paid (i.e. overpaid the tax) then no.

[pr1]

Yes this would be classed as interest income into your company.

And therefore taxable - so you will pay corporation tax on this!

HMRC have to get something from the interest they pay you

So you need to pay tax on overpaid tax? is that right?!

Say profit is £100
CT due is £80
CT paid is £85
refund received is £5
then you have to pay CT on the £5, so money back in company pocket is £4

so you lose out on 20% if you overpay?

(add three zeros to each number if you want to make it more exciting)

[SimonMac]

you don't want to pay VAT on £3.78?

Not if I don't have too

[pr1]

you don't want to pay VAT on £3.78?

[SimonMac]

Yes this would be classed as interest income into your company.

And therefore taxable - so you will pay corporation tax on this!

HMRC have to get something from the interest they pay you

Fankoo

[Louisa@InTouch]

Yes this would be classed as interest income into your company.

And therefore taxable - so you will pay corporation tax on this!

HMRC have to get something from the interest they pay you

[SimonMac]

What did your accountant say?

Why did I know it would be you!

The finance department said "throw the cheque in the bin" but Hector have outwitted them

[northernladuk]

What did your accountant say?

[SimonMac]

OH Hector you little tulip, you will try and make my life a PITA!

Seems HMRC have deemed it necessary that I get a (very) small refund from CT, normally its a cheque that I ignore, however this year they have refunded the money back into my bank account, how would I treat this in terms of my books? Its not a sale as I don't want to pay VAT on it, the only refund option is for VAT not CT, would it be deemed as interest the same as if I got it back from the bank, but again I assume I would then have to pay CT on this amount?

As the refund is £3.78 its a lot of hassle which is why I normally throw the cheque away!