CORPORATION TAX SELF ASSESSMENT
54. The introduction of Self Assessment for companies
extended the principles of Income Tax Self Assessment to company
tax returns. Corporation Tax is levied by reference to a company's
accounting period, which can vary in length and end on any day
of the year. Corporation Tax Self Assessment applies to accounting
periods ending on or after 1 July 1999. Companies normally have
to file their returns 12 months after the end of an accounting
period. But unlike Income Tax Self Assessment, the date when tax
has to be paid is not the same as the date for filing. For most
companies, Corporation Tax has to be paid 9 months after the end
of the accounting period. So a company which has not filed its
return by the due date for payment of tax will have to pay an
estimate of its tax liability. Companies paying very large amounts
of tax have to make quarterly payments of their estimated tax
liability, with the first payment due half way through the taxable
period and based on a projection of the current period's profits.
55. The Revenue told us that the introduction of
Corporation Tax Self Assessment had been a less radical change
for companies than Income Tax Self Assessment had been for individuals.
Company taxation had, since 1993, been governed by Pay and File
rules, which introduced many of the planks of Self Assessment
such as a computational style return form requiring the company
to work out its own tax bill, and the requirement to pay on a
current year basis before the tax liability is established by
56. The evidence we received confirmed this view.
The Chartered Institute of Taxation noted that "the vast
majority of companies are small or medium sized companies. For
them, the transition from the Pay and File system to Corporation
Tax Self Assessment involved very little change. No significant
problems were experienced."
The Institute of Chartered Accountants in England and Wales noted
that because Corporation Tax Self Assessment had been built on
the back of Pay and File it had been "relatively painless"
for companies. However,
both Institutes called for a change to the system for large companies
which are required to pay their Corporation Tax in quarterly instalments,
the first two of which are based on estimates.
According to the Institute of Chartered Accountants in England
and Wales "this is an unnecessary complication, which could
be avoided if instalments were based on, for example, the previous
year's figures with a balancing payment at the end to reflect
the final liability for the year."
57. It appears from the evidence we have received
that Corporation Tax Self Assessment has been introduced without
any significant problems. We note the suggestion that the quarterly
instalments large companies are required to pay should be based
on prior year figures, rather than on estimates as at present,
with a final adjustment based on outturn when known. We recommend
that the Revenue examine and report on the costs and benefits
of such a change.
68 Ev 8, paras 53-56 Back
Ev 8, para57 Back
Ev 27, para 3.2 Back
Ev44, para 41 Back
Qq159-162, 209 Back
Ev 44, para 45 Back