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UK businesses overpaid at least £9.1bn last year, up 12.4% from the previous year, according to a leading national accountancy group.
According to UHY Hacker Young, this year’s figure will be “dwarfed” as the lockdown recession and slumping profits means businesses will have overpaid corporation tax on a grander scale.
Large corporations are required to pay corporation tax based on forecast profits for the upcoming year, leading to overpaid taxes if profits do not meet expectations.
Many UK businesses will have made estimates prior to the economic crash and overpaid corporation tax “significantly” as a result.
UHY Hacker Young said that some businesses may be unaware that any losses generated this year can be carried back to reduce tax liabilities of the previous year.
Currently, there is no system for overpayments to be refunded automatically. If businesses fail to carry back the losses and request a refund in time, HMRC is entitled to hold onto their money indefinitely.
Nikhil Oza, corporate tax director at UHY Hacker Young, said: “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.”
He added: “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.”
