Correcting corporation tax error in previous year

Correcting corporation tax error in previous year

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I have a client who overclaimed expenses in a previous year (Y-E Mar 15) by about £1,000. The adjustment gives him a loan account balance of £1k.

The Mar 15 accounts are out of time for filing an amendment; I just want to check whether the only option is to send HMRC a letter with the relevant details so they can raise an amended corporation tax assessment and also a S455 assessment. I don't think solely putting the adjustment in the next set of accounts would be correct, but have seen no specific HMRC guidance on this point.

In terms of the statutory accounts,the error is not material enough to warrant adjusting and refiling at Companies House. Of course, I will need to adjust the next set of accounts butmake an appropriate adjustment in the ct computation for the fact it relates to a credit already assessed.

Replies (8)

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By Ruddles
23rd Feb 2017 20:28

If you're insistent on doing it by the book, client will need to make a voluntary disclosure. But how material is the tax on £1k?

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By johngroganjga
23rd Feb 2017 22:38

I am puzzled about what the error is. You seem to be saying that the 2015 accounts should have included an overdrawn loan account, but presumably didn't. What was the other side of the error?

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Replying to johngroganjga:
By Ruddles
24th Feb 2017 08:27

Seems obvious to me

Original journal: Dr Expenses (overstated) £1k
Cr DLA (to clear it) £1k

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By Matrix
24th Feb 2017 06:33

You can still file an amended CT600 and pay the tax. The s455 tax would be late though and there would be additional corporation tax if the expenses go down by £1,000, also late but interest would be small. I expect you could restate the loan as a PYA in the following year's accounts.

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By stt
24th Feb 2017 09:20

Thanks all, confirms we must amend the original CT return and cannot just adjust in the next CT return.

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By Huw Williams
27th Feb 2017 15:22

Having worked for large companies which audited rather than prepared accounts, we often had a series of "unadjusted errors" - items which we might have dealt with differently if we were preparing the accounts. The point of keeping a note of these was to see if they added up to anything significant. If not the accounts were not adjusted and the tax returns followed what the accounts said.

You have said the error is not material and I would be inclined not to make any adjustment. I can imagine all the extra calculations needed to explain to HMRC what you are doing and why - and at the end of the day all you are "correcting" is a small timing difference.

Are you sure this is the right approach?

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By stt
27th Feb 2017 16:01

Thanks Huw, my take is to determine what is the strict 'correct' position and then only diverge from that if HMRC explicitly confirm in a particular case they are happy for us to do so.

The point of my question was to see whether there was some specific guidance from HMRC as to what was acceptable in these circumstances, but I don't think there is any, and so we revert to the strict position.

In my letter to HMRC I will explain the corrections required but give them the option to say to us just to adjust the next accounts if they are happy with that.

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Replying to stt:
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By DPS
10th Nov 2017 16:05

I have a similar issue currently - did you approach HMRC and what was their response? Amount is immaterial and are CT losses to cover amount anyway so would make more sense to just adjust in next return.

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