If you make errors in your accounts and Corporation Tax returns, you should deal with them as promptly as you can because delaying things can increase interest, penalties and the risk of an HMRC enquiry.
However, if you do make a mistake, the way you make amends with HMRC matters.
Your first step is to establish:
- What caused the error
- Which periods and taxes are affected
- How much tax is due
- Whether the accounts, Corporation Tax return or both need correcting
A Corporation Tax return can usually be amended within 12 months of its filing deadline, but where this period has passed, another disclosure route may be required.
How to correct a Corporation Tax return
If you are still within the 12-month amendment window, you can correct your Corporation Tax return by submitting an amended CT600 along with updated computations and, where necessary, revised accounts.
This is typically done through your Corporation Tax software or agent.
It is important to ensure that any amendments are consistent across all documents.
For example, if the error effects profit figures, both the accounts and tax computations should be updated to reflect the corrected position.
Where the amendment window has passed, you can’t simply resubmit the return and instead, you will need to notify HMRC of the error separately.
This is often done by writing to HMRC or making a formal disclosure, depending on the nature and scale of the issue.
In some cases, particularly where multiple periods are affected or the error is significant, HMRC may expect a full disclosure covering all relevant years.
This should include:
- A clear explanation of how the error arose
- The periods affected
- Revised calculations of the correct tax position
- Details of any tax, interest and potential penalties due
It is also worth noting that correcting an error may have knock-on effects.
For example, changes to taxable profits could impact losses carried forward, group relief claims or associated company thresholds.
These wider implications should be reviewed carefully before submitting any correction.
What are the penalties for mistakes in your Corporation Tax filings?
It's important to note that an error does not automatically result in a penalty and HMRC considers the behaviour that caused it in its processes.
The long and short of it is that where reasonable care was taken, no penalty should normally apply, if you can prove it.
However, a careless error can attract a penalty of up to 30 per cent of the additional tax.
Deliberate errors, on the other hand, can result in penalties of up to 70 per cent, rising to 100 per cent where the error was deliberately concealed.
The penalty can also depend on when and how the error is disclosed or found out.
An unprompted disclosure made before HMRC begins looking into the issue will usually receive more favourable treatment than one made after HMRC has made contact with you.
A clear disclosure should explain the error, provide accurate calculations and give HMRC the information needed to check the position.
However, it's highly recommended that if you ever get to this point, you should seek advice from both your accountant and/or a tax investigations expert.
Taking control of the issue
The right approach will depend on the tax involved, the age of the error, whether you have professional advisers (like an accountant) and whether the mistake was careless or deliberate.
Addressing the issue voluntarily can help reduce penalties, provide certainty and prevent a manageable error becoming a more serious commercial problem.
Either way, professional advice should be obtained before contacting HMRC, particularly where several years are involved or the disclosure may affect more than one tax.
For help with this issue, please contact our team.
