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CVA's and tax refunds


A company enters into a CVA in March 2011 owing money to HMRC amongst others. The accounts to July 2010 and earlier years record loans to the shareholders on which tax due under S455 has been paid. In the year to July 2011 the shareholders loans are repaid in full and S455 relief may be claimed. The relief is substantial.


Will the company receive the tax refund or will HMRC retain to cover liabilities. The amount of relief due is broadly equivalent to the Corporation tax outstanding in respect of earlier years. Roughly a quarter of the outstanding tax would be tax due under S455 and so I could understand HMRC refusing to refund tax that has never been paid.

As the liabilities fall into the CVA and the refund is for a later period, do HMRC have the right to setoff against the earlier liability?

Appreciate any comments


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Had CT refund under similar circumstances

Client entered CVA with HMRC by far the largest creditor.

CT refund received by offsetting losses against profits from previous years.

The refund was paid, however it was forwarded straight to the CVA supervisor.

I doubt very much that you will be able to retain that cash within the business - best check the CVA agreement terms and conditions.

Mind you if the supervisor is lazy and you forget to mention the refund to them you'll probably manage to keep hold of the cash until the current year's accounts are completed. Even then it's relying on someone questioning the movement in CT in the accounts.

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