My client has suffered a late payment penalty for corporation tax which seems rather unfair. Has anyone else been in a similar position?
Fully scanario is this.
New company started trading on January 13th 2017, won a large contract abroad and made good profits in the period ended January 31st 2018. Corporation tax on these profits was £14,084.22
By the time the corpoaration tax needed paying, problems had arisen getting the overseas contract completed and, in the 9 months ended October 31st, enough losses had been incurred to fully offset the corporation tax of the previous period. The accounting period was shortened (to period ended October 31st 2018) and aa carry back loss relief claim submitted.
The loss carry back claim could only offset 346/365ths of the profit for the year ended January 12th 2018 (due to the long period of account) which left a much reduced corporation tax liability of £733.19.
My client paid the £733.19 owing 91 days late and was presented with a further bill of £352.02 in "late payment interest". what seems unfair is that just £5.85 of this relates to the interest on the £733.19. The rest is interest on the £13,351.03 which is wiped out by the loss relief claim (for 293 days until August 1st 2019, i.e. 9 months after the end of the accounting period of the carry back loss relief claim). HMRC's guidance (COM50020 example 1) suggest HMRC's calculation of the interest is correct.
It would appear that the only way to stop this interest accruing would be to pay the £13,351.03 and request a refund from HMRC. My client's current cash-flow won't sustain this.
Finally the question. Has anyone been able to appeal this interest charge in similar circumstances which, although correctly charged, seem pretty excessive given the circumstances?