Claiming back corp tax

[Robot]

Lets say i made 100K profit one year.

And a 40K loss the next.

As its pretty obvious that 9 months after the accounting date (when the corp tax is due) year 2 is going to be a 40K loss.

Can you get away with underpaying the corp tax when its due and pay HMRC interest on the difference.

I would rather not pay it all only to have to reclaim it back a few months later, when i could be using the money in the business.

Phone HMR&C and explain the position, come to an arrangement, pay a lump sum upfront the balance in instalments for the first year and take the hit on the interest.

Do your second year accounts fairly quickly, or if you know there is a loss why not shorten the accounting reference date and do accounts for 9 months or leave and do 12 months. HMR&C should offset year two against year one, lets face it they aren’t going to give your company money back if you owe them.

Robot

PS If the loss is due to bad debts, make you sure you reclaim the VAT on these.

[Maslins]

Maybe worth pay yourself 5K then.
No tax or ni (assuming no other income).

But you get 1K corporation tax back atleast.

Sure...but still leaves you a long way short of a £40k loss.

[Iron Condor]

It would virtually always be hugely inefficient for tax purposes to pay yourself a big salary whilst your Ltd Co makes a loss. Paying 20% income tax, 11% e'ees NI & 12.8% e'ers NI just to reclaim 21% CT would seem a bit odd.

Maybe worth pay yourself 5K then.
No tax or ni (assuming no other income).

But you get 1K corporation tax back atleast.

[Maslins]

Presumably, you can still incur a loss by paying yourself a salary?

It would virtually always be hugely inefficient for tax purposes to pay yourself a big salary whilst your Ltd Co makes a loss. Paying 20% income tax, 11% e'ees NI & 12.8% e'ers NI just to reclaim 21% CT would seem a bit odd.

[Iron Condor]

Thanks Maslins,

Its not for contracting company.

Still 7 months till the end of my tax year, hopefully i make back my losses by then buts its good to know i can underpay if im sure about the losses nearer the date.

[TroubleAtMill]

Am a bit confused. Assuming you're a contractor, how did you manage to make a loss of £40k? Surely your costs (other than the hypothetical cost of your time) are negligible, especially if you're on the bench as you'll have hardly any travel costs?

Presumably, you can still incur a loss by paying yourself a salary?

[Maslins]

Am a bit confused. Assuming you're a contractor, how did you manage to make a loss of £40k? Surely your costs (other than the hypothetical cost of your time) are negligible, especially if you're on the bench as you'll have hardly any travel costs?

That aside, you certainly can carry back losses against the previous year. You can also use an estimate of the loss if the exact figure is not yet known (bear in mind when carrying back a loss, you are in essence amending the prior year's return to take account of the loss).

Be aware that if you overestimate next year's loss, you'll therefore underpay the tax for the current year, so will be charged not only interest on the underpayment, but potentially penalties as well if HMRC argue you were negligent in claiming a large loss that didn't materialise. So therefore if you do do this, I'd recommend underestimating the loss. Then obviously should the final loss be larger than your current guesstimate, you'll get a bit more tax back in due course.

Again though, assuming you're a contractor, surely getting a decent contract for the last 3 months of the year could very easily bring that loss right down if not wipe it out?

[Iron Condor]

Your CT is calculated on the basis of your annual published accounts. So no, you can't aggregate two years together; or you can but expect a sharp letter from Hector with a bill for payment plus interest.

But if i do year 1 accounts 3 months late and year 2 accounts 9 months early (ie exactly at the year end).

Both years will get submitted and processed at the same time.

I often submit my accounts a couple of months late anyway.

I maybe missing something obvious like it takes X months for HMRC to process my refund.

[malvolio]

Your CT is calculated on the basis of your annual published accounts. So no, you can't aggregate two years together; or you can but expect a sharp letter from Hector with a bill for payment plus interest.

[Iron Condor]

No, I don't think so. You can't "claim it back" but you may be able to carry forward this year's loss to next year.

Im very sure you can carry back losses and reclaim corp tax for atleast one year. But my question is more specific than that, so i wonder if any of the accountants here could answer it.

[moorfield]

Lets say i made 100K profit one year.

And a 40K loss the next.

As its pretty obvious that 9 months after the accounting date (when the corp tax is due) year 2 is going to be a 40K loss.

Can you get away with underpaying the corp tax when its due and pay HMRC interest on the difference.

I would rather not pay it all only to have to reclaim it back a few months later, when i could be using the money in the business.

If I understand correct you're asking if you can offset your loss for current year against Corp Tax owing from previous year profit (100k) ?

No, I don't think so. You can't "claim it back" but you may be able to carry forward this year's loss to next year.

But I remember Mandelson was waffling some months back about helping out smallcos with cashflow problems, so you might be able to do something.

As usual, talk to your number bods.

[Iron Condor]

Lets say i made 100K profit one year.

And a 40K loss the next.

As its pretty obvious that 9 months after the accounting date (when the corp tax is due) year 2 is going to be a 40K loss.

Can you get away with underpaying the corp tax when its due and pay HMRC interest on the difference.

I would rather not pay it all only to have to reclaim it back a few months later, when i could be using the money in the business.