Steven Mugglestone

The more I learn, the less I know

How much does HMRC owe your business?

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MGC Hayles is urging business owners to check if they are due a Corporation Tax refund from HMRC now and not just at the end of each year, as delays are common, as well as asking whether they have ensured that they have claimed a number of major, basic tax reliefs, such as research and development.  They are holding a number of seminars to re-iterate what basic, legal and generous reliefs that are available, which are not taken up.

As well as many reliefs going unclaimed, MGC Hayles says that there was a large jump in the amount of refunded by HMRC over the past year – up from £5bn in financial year ending March 2011 to £7bn in 2012.

Check your payments on account

Larger companies are more likely to be owed money, as they pay Corporation Tax in advance (in quarterly payments), based on their previous year’s profits.  If profits in one year are lower than those in the previous year, due to recessionary pressures or a general decline in business, then HMRC will refund the overpaid tax.  In reality, however, many firms face a long wait to receive any refunded Corporation Tax

A partner at MGC Hayles, Jason Seagrave, reported that the CT refund system can be a bit of a “lottery”, with some companies receiving a refund quickly, whereas others have to wait a number of months before their claim is processed.  In the current economic climate, any delayed payments will put extra pressure on businesses with poor cash flow.

“When a business has overpaid Corporation Tax, refund delays can cause more pressure as the money should be in a business’ bank account, not sitting with HMRC. A missing Corporation Tax refund will add to the difficult financial situation a business might be in that led to the need for a refund in the first place.  We have seen this on numerous occasions and have stepped in to help our clients to get the money back”

Potential insolvencies

In fact, there have been rare situations where firms have gone into administration while waiting for an HMRC refund; “The refund that HMRC is sitting on could be the lifeline that helps a company stay in business, particularly when there is another large creditor to be paid.”  In the year ending March 31st 2012, almost 350,000 companies received CT refunds from HMRC, with an average payout of £20,231.

Always check the payment

Jason Seagrave urges companies of all sizes to check if they are eligible to claim a Corporation Tax refund – either due to simple over-payment, or due to loss relief or an R&D credit relief (it is worth noting that small companies can claim for an R&D credit if it has recorded no profits for the year in question).  Commenting on the significant rise in CT refunds between 2011 and 2012, Jason suggested that many companies may have been “over-confident about their profit predictions recently”, clearly expecting the economic downturn to have given way to a stronger recovery by now, but as we can see from the latest GDP figures, the UK economy is still very much struggling to grow.

MGC Hayles will be holding a breakfast seminar at the Leicester Tigers on 23rd May and the Notts County Ground on 30th May to highlight many of these areas and safe and legal reliefs that are available.

 

 

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Written by Steven Mugglestone

May 9, 2013 at 10:10 am

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