UK businesses overpaid approximately £9.1 billion in corporation tax last year, according to national accountancy group UHY Hacker Young. This figure is up by 12.4% from the £8.1 billion overpaid by firms in 2018. Isabella Colletta reports
A slump in profits caused by the COVID-19 lockdown and consequent recession has meant that many corporations overestimated their expected profits before the pandemic.
UHY Hacker Young added that some businesses may not be aware that losses they make this year can be carried back to claim a refund. Yet, the organisation also points that unlike PAYE income tax, corporation tax has no system in which refunds can be paid back automatically.
Nikhil Oza, Corporate Tax Director at UHY Hacker Young, says: “Even a relatively mild slump in economic growth means that many companies will have missed their profit targets and have overpaid corporation tax – the Covid crash is likely to see them skyrocket.
“Businesses need to be especially on the ball with requesting a refund where they believe they have overpaid based on the current year’s estimated profits. The taxman won’t chase them to give it back.
“Unfortunately, the application process for requesting refunds where the tax return has not yet been submitted is rather tortuous and it may be easier to simply file the tax return.
“Rather than waiting until the tax return deadline, which is 12 months after the company’s year-end, businesses might want to file this year’s tax return as soon as possible. This speeds up the process of reclaiming any overpayment and generating a cashflow advantage, which is likely to be particularly valuable as they try to bounce back from Covid.”