Month: September 2023

  • Scottish Power and the Interesting Case of Corporate Tax Deduction

    Corporation tax deductions: What is a tax deductible company expense? asks MARIA KITT, Director Tax Insight UK

    Its not often we have an interesting tax case to steer our attention away from our innovative companies. This case is an exception – Back in 2014, Scottish Power claimed a tax deduction of some £28m for the fines it paid  to its Regulatory Body, GEMA, further to action taken against it for mis-selling tariffs and services and fuel supplies to consumers including charities, vulnerable customers and consumers/consumer groups. The numbers and time span speak for themselves but this is an interesting point of tax law – whilst ALL receipts potentially linked to a company’s business activities are taxable, not all of the payments a company makes are deductible.

    In the case of Scottish Power it claimed a tax deduction on its fines – whereby the tax payer shares the burden of  its penal costs for breaking the law/regulatory code, (some 25% of £28m)!

    The taxation of companies can appear superficially puzzling at times, but hopefully this case highlights the fairness that underlines UK Corporate Tax law & policies and the appetite HMRC has for ensuring fairness is applied no matter the size and resource of its opposition. The full case can be read here…………https://assets.publishing.service.gov.uk/media/64f727cc9ee0f2000fb7bf02/Scottish_Power_Ltd_and_others_v_HMRC_final_decision.pdf

  • SEPT 2023 New HMRC Notification and Claim documentation rules

    RD Claims – Additional Information Requirement effective 01 August 2023.

    MARIA KITT, Director Tax Insight explains HMRC now required additional information to support ALL claims for RD incentives & Reliefs, with some companies being required to make advanced notification of their intention to claim. Unsurprisingly, the new system has quickly weeded out deficient claims that lack substantiation and -proof is in the pudding – this protects HMRC from paying tax credits where a claim is not supported with the relevant documents. However I was surprised by the statistic which shows that of the claims filed to date, almost half are unsupported……

    Dear members,[ of HM Treasury Consulting Group]

    HMRC recently introduced new rules for Research and Development (R&D) relief claims, including the requirement for APs beginning on or after 1 April 2023 for some claimants to submit a Claim Notification, and for all claimants to complete an Additional Information Form (“AIF”) for all claims from 8 August 2023. The AIF is a digital service available on gov.uk.

    The AIF has been mandatory for four weeks now and we appreciate the large number of customers who have successfully submitted their completed form alongside their CT600, ready for validation by HMRC’s systems.

    We have found, however, that almost half of all claims we have received so far (between 8 August and 3 September) have been submitted by customers without the required AIF. This week we will begin writing to those customers – and, where authorised, their agents – to explain that their R&D claim is invalid and to tell them what they need to do to make a valid claim. We attach an example of the letter we will be sending out.

    Our Customer Service teams are issuing these letters beginning with the earliest CT returns received. From September, this will be a standard automated process and, where necessary, customers will receive notice of any correction much quicker going forwards.

    You can find the guidance relating to R&D on the GOV.UK pages ‘Research and Development tax relief’ and ‘Claiming R&D tax reliefs’. Further details can also be found in the attached letter