20 February 2012

Publications that covered this article include City AM, The Daily Mail and The Daily Telegraph, 20 February 2012.

• £9 billion in corporation tax repaid by HMRC last year
• Worth average of £25,000

The total amount paid out by HM Revenue & Customs (HMRC) in corporation tax refunds reached £9billion in the year to March 31 2010, up from £8.7billion in the previous year, says our research.

According to our findings, the total amount of repaid tax has climbed by 91% in the five years to March 31 2010, from £4.7 billion to £9 billion.

Roy Maugham, tax partner at our London office, comments: “There has been a huge increase in the amount of corporation tax that has been refunded to companies, as losses accumulated during the recession.”

“In the recent economic climate, UK businesses are likely to have incurred losses that can be off-set against earlier profits, which is why they might be eligible for repayments.”

Our research say that the average amount paid out for each claim has risen by 43% to £25,259 in the year to March 31 2010, compared to £17,683 the previous year.

Roy says: “Corporation Tax refunds can often be a significant amount and companies should be checking to see whether they are eligible for a refund.”

Corporation Tax claims taking months to process

Roy comments: “HMRC seem to be getting slower and slower at processing refunds. Claims are now typically taking two or three months to process. Even extreme delays of two years are no longer seen as uncommon, but often HMRC wait until nine months after the year end to repay excess instalments.”

“These delays in repaying tax, to which companies are fully entitled, can cause enormous problems for businesses, especially in this economic environment.”  

Our findings points out that the total number of claims for corporation tax refunds made to HMRC has fallen by 25%, from 492,000 to 371,000.

Roy says: “The number of claims made to HMRC for refunds has actually fallen, which raises the question of why it is taking them so much longer to process claims. Job cuts at HMRC may have had an impact on its ability to function efficiently, but this is having a serious knock-on effect on businesses.”

“In many cases businesses are struggling with cash-flow problems while HMRC is sitting on their tax. Although unusual, it’s not unheard of for a company to fold while waiting for a rebate.”

Roy suggests that the lower number of claims may be because of the uneven nature of the recession which left some sectors, like retail, struggling to survive while other sectors escaped largely unscathed.

Roy adds “It’s quite surprising just how sharply the number of claims has fallen. This may be because there are simply fewer companies in the UK, which would naturally reduce the number of claims being made.”

Roy Maugham