If you pay corporation tax before the due date, HMRC will credit you with interest on it, but then take it back again as a “permanent overpayment”: https://www.whatdotheyknow.com/request/368668/response/911552/attach/html/3/2016%2000209%20Jones.pdf.html
You can reclaim this interest payment from them - but I am stuck with two things, how to actually do so when filling in the online CT600, and secondly how to account for it in Quickfile.
Anybody done this?
At the end of the CT600 it asks you to enter bank details for any refunds plus in case of small refunds, a minimum payout amount, which remains on your account and can be deducted from tax due in later periods.
When you pay your Corp tax early the HMRC pay interest into the bank account entered on the CT600.
This is then tagged as misc income, the same way as bank interest is tagged
Hi George, in my experience they do not pay the interest earned anywhere - they retain it as a “permanent overpayment”. In order to reclaim you it you need to phone them up and them they will “reallocate” it to a different accounting period. This can (apparently) take ~15 working days but will (they say) eventually show up in my .gov.uk overview. It counts as taxable income but should (they said) be accounted for as being received on the date of reallocation. So that’s a headache for a different year’s CT600.
Hi dlamp,
It happens the way I explained for all my clients who pay corp tax before the due date which is 9 months and one day after their accounting period ends.
(I enter £10 on all clients CT600’s, so credits or refunds above that are paid out)
For example one clients Tax due was £15,241 year ended 31st Aug 2016
Tax was Paid early on 25th Oct 2016
Tax Due date was 1st June 2017
The client received the interest of £45.72 in their bank on 12th June 2017 just 11 days after the tax due date.
This is the HMRC’s records for this example:
Thanks George, that’s really very helpful. I was under the impression from the link given in my original post that retaining interest as a “permanent overpayment” was the norm. Particularly interested that entering £10 as the threshold for repayment is reasonable.
Just curious as to why in your example tax was paid after only ~2 months when HMRC won’t start paying interest until (I think) roughly six and a half months after the end of the accounting period?
Thanks again.
In my experience the HMRC pay interest fairly soon after the tax due date which is 9 months and 1 day after the accounting period end.
Hi George, thanks again; turns out I misremembered or misread the relevant .gov.uk page. Early payment starts earning interest from 6 months and 13 days after the start of the accounting period, not the end.