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Corp Tax Late Payment Interest - can I appeal?

Corp Tax Late Payment Interest - right to appeal

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?

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11th Feb 2019 13:36

ask then to recalculate it , it appears wrong if there is a loss carried back

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11th Feb 2019 13:36

ask then to recalculate it , it appears wrong if there is a loss carried back

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to carnmores
11th Feb 2019 19:33

Hi Carnmores. I have got them to re-calculate it but the problem is that it ISN'T wrongly calculated, the rules surrounding a loss only partially relieved gives rise to this peculiar way of calculating the interest (interest is charged on the full intervening year unless the tax has been paid in full and then refunded). That is why I quoted HMRC's guidance COM50020 example 1.

The problem I have is it is the interest charge isn't incorrect but is unreasonable large. My client just seems to have dropped unlucky.

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11th Feb 2019 14:25

Seems a bit ridiculous that because the first year had an extra 19 days that you have an extra £350 charge. I don't think you would have to pay the amount in full to clear it off though, just the interest charged.

Just talking out my [***] here - but is it possible to get the first two APs changed so the short period is first and long period second? That way the loss would be carried back in full against a period of 365 days and then you would only get charged the lower amount of interest?

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to Paul Hawes
11th Feb 2019 19:37

Thanks Paul. Changing the accounting periods wouldn't help here as both periods have profits therefore there will always be some remaining profits after the carry back claim is done.

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11th Feb 2019 19:41

My understanding is that you can't appeal against an interest charge but can make an objection against it.

Has anyone ever successfully done this on the grounds that the charge is unfair / unreasonable?

Hoping someone can provide me with an insight on how best to approach this.

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to johnny fartpants
11th Feb 2019 20:11

Personally, I think you're stuffed. An objection on the basis that it's unfair won't fly (if it's legislated, then the tribunals won't override it).

Unless you can pull another reason out of the hat....

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to SteLacca
12th Feb 2019 08:48

No I can't.

That was the reason for posting. I suspected the same. You can see from the figures that it's unfair. It seems wrong that nothing can be done in a case such as this.

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