Common return errors
Your accountants have asked you to check and sign the company tax return which they’ve prepared. What exactly do you need to check and who’s responsible if there’s an error?
Corporation Tax returns
Every active company has to submit a Corporation Tax (CT600) return to the Taxman within twelve months of the end of its accounting period (but don’t forget the tax is actually due three months earlier). For example, a company with an accounting period ended December 31, 2005 has until December 31, 2006 to submit the completed return.
Penalties. The penalty for not meeting the twelve-month deadline is an automatic £100. And unlike self-assessment, this penalty is due even if the company has no tax liability.
Rejected! The Taxman will reject a return that’s incomplete. That’s not really a problem if there’s sufficient time to resubmit it before the deadline expires. However, if there isn’t, the return will be late and incur penalties.
Who’s responsible? Even though it’s likely to be your accountant that completes the form, it’s the company, and therefore you, that’s responsible for making sure it’s complete and submitted on time. If it’s not, it’ll be the company that’s fined and it could also increase the chances of an investigation into the company accounts. Your accountant has probably protected himself by saying “please check the return and providing you are happy, please can you sign and date it where indicated on page 1”. But, what should you be checking?
Common errors
We’ve prepared a checklist of the most common errors based on our own experience and comments from the Taxman.
Visit http://companydirector.indicator.co.uk (CD 07.08.05) for a common error checklist.
Repayment? Make sure you have put an “x” in the box under “About this return”.
No turnover in Box 1. A very common reason for rejection is that the company’s turnover for the year is not shown in Box 1. This doesn’t affect the tax bill, but the Taxman uses this information for statistical purposes so it’s vital to check there’s an entry here.
Associated companies (Box 39)
It is also very important that the correct number of associated companies is entered in Box 39 as this affects how much tax the company pays. If there’s one associated company, the tax thresholds are halved, i.e. the 19% small companies rate would only apply up to profits of £150,000 instead of £300,000. So, if the number of associated companies in Box 39 is more than it should be, then the company could end up paying far too much tax.
What’s associated? Basically, one company is associated with another if either company controls (e.g. owns more than 50% of the shares) the other or both companies are controlled by the same people. So, if you (or you and your spouse) own more than 50% of the shares in two companies, then these companies will be associated and “1” (not “2”) should be entered in Box 39 of each company’s tax return.
Inactive. However, non-trading companies are not counted as associated. So, if you control another company that’s dormant or no longer trading, make sure it isn’t still being included on the return. Because the rules are quite complicated, it’s best to speak to your accountant if you’re unsure whether companies are associated or not.
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