New (to us) client company, arrived too late for us to rearrange AP date. Incorporated 15th Dec 2019, commenced trading (circa) mid- April 2020. Firtst accounts to 31 Dec 2020.
So no problemo with Cos House accepting a 12 and a half months duration single set of accounts. Submission date nigh.
But two Ct600s: for (dormant) p/e 31 Dec 2019 & y/e 31 Dec 2020 would surely trigger a late filing penalty for the earlier return. Likewise if the Ct600s are timed at p/e (circa) 15th April 2020 & p/e 31 Dec 2020.
I have a feeling of deja-vu over this question (I want to say from around 15 years ago) and might well receive a slap from the panel. Nevertheless, does anyone please have any advice or guidance for a workaround that (a) avoids any appeal against the late-filing penalty; and (b) avoids any HMRC penalty for late filing of a "dormant" initial period return?
The best intel I have is that HMRC were never advised that the company commenced trading activities in April 2020 (so quite probably expect the company to be dormant currently). Should the client risk it by skipping the initial period's CT600 return?
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I am not the OP, but let's venture on his behalf: because you'd had a notice to file and you had read https://www.gov.uk/dormant-company/dormant-for-corporation-tax
Yeh, but they need to read the CT603s which says:-
If the period shown above is not an accounting period, a return is required
• for each accounting period that ended during or at the end of the period shown above, or
• if no accounting period ended during or at the end of that period, for that part of the period that does not form part of an accounting period, or
• if the company was outside the charge to corporation tax throughout the period shown above, for the whole of that period.
In practice I find if you send a CT600 for the correct (generally trading) AP then eventually the records get updated with the new AP and the two incorrect AP CT603 requirements get cancelled.
Making the effort now to re-read the quote and more importantly the law it looks like strictly a return is required for the dormant period (if a notice is issued).
Nope, wasn't contemplating that!
Here's the law:-
https://www.legislation.gov.uk/ukpga/1998/36/schedule/18
Have a look at 14(1)(b). Filing date is 31/12/2021 for both returns.
It may be same filing date
But if the computer thinks the first one is late, computer will charge penalty.
No worries per HMRC, you can always appeal and we will eventually fix it
Yeh, used to be common with the 12 months + short period situation (of actual trading).
Now, however, as I've stated above, the two original (imposed) APs get replaced by actual APs.
Whoever writes this stuff has not dealt with HMRC as a "customer"
CT returns get issued whether client "registers" or not
Does anyone actually register for CT
What exactly is registration
There was in the past a requirement to notify commencement of trading.
A club might need to register as HMRC have not heard of them, but companies get sent their CT UTR direct from companies house
See my 25th Nov 2021 11:20 post.The dormant period Ct600 should (in my case) have been filed by mid-April 2021.
So, I am probably going to get told off for this on here but this is how I've dealt with it for a long time and no issues so far. And yes I do understand, strictly it is incorrect.
The reality is, unless HMRC were advised of the dormant period, a CT600 is expected so there is the hassle of notifying HMRC of that.
If the CT600 if files only for the trading period and not the dormant period then a penalty will be issued. I have never seen a penalty held up if you tell HMRC that the company was dormant however, again it's the hassle if having to appeal etc.
So this is how I would deal with your example:
1. Submit the Accounts and all the numbers and generate the CT liability on the first CT return for the period 15 Dec 2019 to 14 Dec 2020.
We're now in November so the CT600 will be in time. Perhaps some can remind me but I think it's interest only charge and no penalty for late payment of any CT.
2. Submit a dormant CT600 (or equivalent) for the period 15 Dec 2020 to 31 Dec 2020.
These are the dates I believe HMRC would have issued for the CT600's.
I do know strictly it is incorrect and perhaps there are other issues I have not considered in doing this but it avoids all the hassle with dormant period, possibly hours in the phone. You could argue, a letter to advise dormant period would take 10min but in the past HMRC have still issued a penalty as they had no record of the letter advising of the dormant period and trading start date.
Bit of a high risk strategy. You are declaring a period of non trading in the middle. Could easily have repercussions down the road.
You're still barking up the wrong tree.
See my 25th Nov 2021 11:20 post.
Adding your own +1 to your previous comment? To be fair, it was such a good point it was worth making it twice (any Dwarfers out there?)
I'll +1 both anyway :-)
HMRC did a flip flop on assumptions a while back
Firstly, Assumed trading unless told othersise
Then, Assumed not trading, with a £200 penalty for fairly to notify
Then. Assumed trading unless told otherwise
The current system needs human intervention but fails miserably for new cos, particularly for what they call flat management companies.
There is less admin in submitting zero returns than trying to get HMRC to get it sorted
I would submit the returns there are expecting
Any missing returns will get the automatic penalty
Yes you can appeal or phone or write (several times) but it takes forever and in the mean time client will assume it is all your fault if you cannot sort it all out in 10 minutes
For your position I would just enter start date as date of incorporation.
2 returns and 2 liabilities
Last time I was in anything like this position I did sort it in 10 minutes. With a phone call.
It was pre-pandemic.
The outcome was doing what Matrix said and Wanderer implied. But I'd agreed it with HMRC upfront and no funny business ensued.
Last 2 that needed sorting
Person on phone said that both needed to go to the back room and please do not call back for at least three weeks
That was over 2 months ago
No action yet
By letter I have several that were sent at least twice and second letter always at least 6 months after first
A couple did get done on second request but at least 4 will need a third contact
But based on above phone call I expect nothing other than outrageous further delay
Waste of time comparing then and now
Two are for companies that changed accounts dates but HMRC have not noticed
The pont is that a human must fix it and the CT computer chugs on producing penalties that just waste time getting resolved
Tax Dragon
"Last time I was in anything like this position I did sort it in 10 minutes. With a phone call."
That solution works for me every time - very rarely you get a stupid advisor who doesnt understand how the system works but call saying dormant till xth april trading from xth april + 1 and confirm first period end end date - dates are aligned and you can file job done.
Its not the end of the world if you file first with your known correct dates then ring up to get aligned but historically some returns used to stick if starts dates didnt match (that may be fixed now) - and i would rather know hmrc are in agreement with my plan before filing - just in case they change their rules (again)
Any penalties are automatically removed for superseeded periods - or if they arent automatically removed scoop up with next phonecall to hmrc services. I have never needed to formally appeal a penalty for superseeded period ever.
Note some numpty advistors get confused if you give the impression that "dormant acounts may to be filed at companies house " so ensure you make it clear that is simply non trading period for which no ct600 was due. Note if you do want changes and there is a period of dormant accounts that does need filing at companies house that filing should be done fists before contacting ct services as they they are highly likley to check and demand that filing is done fisrt (reasonable request IMHO with amount of fraud going on.
Tax Dragon
"Last time I was in anything like this position I did sort it in 10 minutes. With a phone call."
That solution works for me every time - very rarely you get a stupid advisor who doesnt understand how the system works but call saying dormant till xth april trading from xth april + 1 and confirm first period end end date - dates are aligned and you can file job done.
Its not the end of the world if you file first with your known correct dates then ring up to get aligned but historically some returns used to stick if starts dates didnt match (that may be fixed now) - and i would rather know hmrc are in agreement with my plan before filing - just in case they change their rules (again)
Any penalties are automatically removed for superseeded periods - or if they arent automatically removed scoop up with next phonecall to hmrc services. I have never needed to formally appeal a penalty for superseeded period ever.
Note some numpty advistors get confused if you give the impression that "dormant acounts may to be filed at companies house " so ensure you make it clear that is simply non trading period for which no ct600 was due. Note if you do want changes and there is a period of dormant accounts that does need filing at companies house that filing should be done fists before contacting ct services as they they are highly likley to check and demand that filing is done fisrt (reasonable request IMHO with amount of fraud going on.
https://www.gov.uk/tell-hmrc-your-company-is-dormant-for-corporation-tax
Tried it once and it worked, within days
No human needed
It removed the 2021 return
Let us know if it works. (I ask because my guess is that it won't let you tell HMRC that the company used to be dormant. But I'd like to know for sure.)
I tried this but couldn’t see the option to advise when the company started trading, only when it ceased trading.
I would just call HMRC and get the return for the dormant period cancelled.