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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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?
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?
Seems obvious to me
Original journal: Dr Expenses (overstated) £1k
Cr DLA (to clear it) £1k
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.
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?
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.