HMRC have confirmed their position on late filing penalties for CT and CIR returns in light of COVID-19.
HMRC have re-iterated that, while they will not be extending the deadline for corporation tax (CT) returns in light of COVID-19, they are prepared to accept disruption caused by COVID-19 as a ‘reasonable excuse’ for late filing on a case by case basis and that where taxpayers contact HMRC in advance of the deadline they can arrange for late filing penalties to be deferred. In addition, HMRC have clarified the position for late filing of Corporate Interest Restriction (CIR) returns. Once proposed legislation has been enacted with retrospective effect, as with CT returns, HMRC will not apply late filing penalties where the taxpayer has a ‘reasonable excuse’ and the return is filed within an acceptable period of time after the reasonable excuse ends. However, as CIR returns can be filed using estimated figures, HMRC have advised that reporting companies should proceed with filing the CIR return on time where possible.
Corporation tax returns
As reported previously in Tax Matters Digest, where taxpayers contact HMRC with a ‘reasonable excuse’ prior to the filing deadline for CT returns HMRC have the discretion to waive late filing penalties for a temporary agreed timeframe. For taxpayers with a CT return due to be filed by 31 December 2020, HMRC have confirmed to us that where there are valid reasons for late filing, then a penalty deferment can be granted up to the end of January 2021. Businesses with a Customer Compliance Manager (CCM) should approach their CCM to agree this in the first instance. Other businesses may contact HMRC via their corporation tax helpline or HMRC webchat.
Where taxpayers do not file their CT returns on time and do not contact HMRC in advance of the filing deadline to agree penalty deferment, a late filing penalty of £100 will be issued automatically. This can however be appealed where there is a ‘reasonable excuse’ for the late filing.
If a reporting company is appointed for a period of account, it must normally submit the CIR return for the period within 12 months of the end of the period. If a reporting company does not submit a CIR return when it is required to, it may have to pay a fixed penalty of £500 if the return is up to three months late, or £1,000 if the return is more than three months late. There is currently no statutory basis for appealing any penalty for failure to deliver a CIR return or any ‘reasonable excuse’ exemption from such penalty. However, on 21 July 2020, HMRC announced that Finance Bill 2021 will introduce a ‘reasonable excuse’ exemption, with retrospective effect from 1 April 2017.
Although HMRC do not have the discretion to provide an extension to the statutory filing deadline for a CIR return, they have advised that no late filing penalty will be applied in scenarios where the reporting company had a reasonable excuse for missing the deadline and the return is filed within an acceptable period of time after the reasonable excuse ends. However, as CIR returns can be filed using estimated figures, HMRC have advised that reporting companies should proceed with filing the CIR return on time where possible. Any estimated figures used should be clearly signposted in the CIR return.
To reduce the administrative burden on groups, HMRC have confirmed they will accept there is a reasonable excuse for late filing of the CIR return in cases where most companies within a CIR group have obtained a deferral to late filing penalties for their CT returns and the CIR return is delivered by the date agreed for CT return late filing penalty deferral purposes.
Where groups consider that they have a reasonable excuse for late filing, HMRC have requested they should contact their CCM in advance of the filing deadline where they have one. Taxpayers without a CCM should provide an explanation of their ‘reasonable excuse’ position when submitting the CIR return.
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