HMRC gives update on issues with corporation tax extended accounting periods
Following previously reported issues with submitting Corporation Tax returns for accounting periods longer than 12 months, we look at a workaround to enable returns and amendments to be submitted electronically for affected clients.
In our article on practical issues for corporation tax for companies with accounting periods lasting longer than 12 months, we highlighted the practical issues with HMRC’s legacy computer system for corporation tax. Corporation tax accounting periods cannot exceed 12 months, so when a company prepares accounts for a longer period it is necessary to submit two corporation tax returns for the two corporation tax accounting periods.
The HMRC computer issue has caused problems with the ability to accept corporation tax returns and amended returns electronically. This is because the HMRC computer system automatically assumed that a company has a filing deadline of 12 months after the end of the corporation tax accounting period, even where Schedule 18 of the Finance Act 1998 provides otherwise.
As this is a subject that has caused inconvenience and additional costs for our members (and ultimately their clients) by having to submit returns manually, we have had ongoing dialogue with HMRC to see whether any workarounds can be identified.
Following this dialogue, it should now be possible for HMRC to override the default filing dealing and accept amended returns outside of the default that the HMRC computer system will have of two years from the end of the corporation tax accounting period window. Where the filing deadline has been manually updated, it should be possible to submit corporation tax returns after 48 hours, by which time the system has updated to reflect the correct filing deadline. The HMRC software should then take account of this when deciding whether an amendment submitted online is within the amendment window.
So, for example, if a tax agent were to contact HMRC today to ask for the filing dates for an extended accounting period from 1 July 2021 to 31 December 2022 (the corporation tax accounting periods being year ended 30 June 2022 and six months ended 31 December 2022), it should be possible to submit an amended return after a couple of days. This reflects the statutory position, rather than the incorrect default position in the computer system of not accepting amendments to the return for the year ended 30 June 2022 because more than two years have passed since the year end.
We will continue to have dialogue with HMRC on this issue but will rely on feedback from our members in practice as to whether returns are being accepted electronically. Please let us know if you are finding that this work around is successful for your clients, where they have an extended accounting period.
Let us know your views
We would be very interested to hear from our members regarding their experiences with submitting corporation tax returns and amended returns for companies with an extended accounting period. We also welcome your views more generally, which help inform our work on consultations or other tax-related matters. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members.
Please email tax@icas.com to share your insights and feedback.
