'Double-check if you're due a corporation tax refund'
Business owners should take it upon themselves to check their eligibility for a corporation tax refund at the year-end because HM Revenue & Customs is unlikely to return any overpayment without being asked to first.
Issuing the recommendation, UHY Hacker Young said firms should “always double-check” if they could be due a refund for corporation tax, indicating that leaving it up to the Revenue, or their accountant, could leave them short-changed.
Not only is HMRC “unlikely” to issue an over-payment refund without being approached to, it is also “often” slow in returning any excess payment, potentially leading to cashflow problems due to the missing funds, the accountancy firm warned.
“Businesses face a real lottery on corporation tax refunds,” said the firm’s tax partner Roy Maugham. “Some businesses do receive a refund quickly, but others will have to wait months…It’s rare, but there have been occasions when a business has gone bust while waiting on a refund to be paid by HMRC.”
His comments come after figures obtained by the accountant show that the value of corporation tax refunds paid out by HMRC leapt by £2bn last year (ending March 31st 2012) to £7bn, up 40% from £5bn in the previous tax year.
The dataset also shows that, of the 346,000 businesses which received corporation tax refunds last year, the average amount paid out for each approved claim was £20,231.
“Corporation tax refunds can be worth a lot to individual companies,” reflected Mr Maugham. “The number of corporation tax refund requests that HMRC receives is not that large in the scheme of things – especially when compared to the millions of self-assessment tax returns that HMRC receives – but the organisation still struggles to process them quickly.”
Companies are reminded that a corporation tax refund will become due when a business’ yearly profits prove to be lower than expected or when a business makes a loss – in this case, businesses are paid a refund from their corporation tax paid in previous years.