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UK businesses have overpaid £11.9bn in corporation tax over the past year, according to UHY Hacker Young, as the firm urged companies to check if they have overpaid and to actively pursue refunds.
The firm warns that HMRC will not automatically refund businesses if they overpay corporation tax and that they must reclaim overpayments manually.
This is because corporation tax is paid by large businesses on their estimated profits for the upcoming year. An overpayment means that the companies’ accounts teams overestimated profits and therefore also overestimated the amount of tax they would need to pay.
Failure to point out that they have overpaid their tax will mean they miss out on “much-needed” cash flow, says UHY Hacker Young.
The problem can be particularly bad when the economy is weak, and a businesses’ profits have fallen from the previous year.
Nikhil Oza, corporate tax director at UHY Hacker Young, said: “Overpayment of corporation tax is a multi-billion-pound problem. Most large corporations spot overpayments, or at least have good tax advisors which do the checking for them, but small companies without dedicated tax advice can lose out on thousands in overpaid tax if they don’t look out for the problem.
“HMRC won’t tell a business that it is overpaying corporation tax, they don’t see it as their job, and the money will simply sit in HMRC’s account, earning a very low rate of interest. Businesses need to take the initiative and approach HMRC to get their money back so that they can put those funds to better use.”
He added: “Many businesses are struggling due to rising costs and a slump in consumer spending, so they should pay special attention to ensure they aren’t making unnecessary overpayments.”
