Contractors, did you receive a CT603 notice?

At least one eagle-eyed contractor has spotted that an article on ContractorUK last week referred to CT603s – without going into too much detail about what exactly they are.

CT603 -- in a nutshell

A CT603 is a notice to request the filing of a company tax return for corporation tax, including the supplementary pages.

This includes the company accounts, profit and loss calculations for corporation tax, the corporation tax bill and computations, which are the mathematical calculations used to arrive at the final figure, writes Gary Addison, a director at Redundancy Claims UK.

This notice essentially raises the obligation to submit a corporation tax return, also known as a CT600 form -- what last week’s article demystified. If the corporation tax return is consistently filed late, you could face a series of penalties.

Who will receive a CT603 notice?

All actively trading limited companies will be issued with a CT603 notice three to seven weeks before the accounting period specified in the notice. You will also receive a CT603 if your business does not reside in the UK, but trades though a permanent establishment or branch in the UK.

If your company is dormant, you will not be required to submit a corporation tax return unless you traded during the specified time on the notice. If you restart trading after a period of dormancy, you will have a maximum of 90 days to inform HMRC.

My company is dormant -- why have I received a CT603 notice?

A company is typically dormant for corporation tax if they have stopped trading and there is no form of income, including through investments. In order for a company to be dormant; buying, selling, renting and marketing should not take place (and you should cease employment of any staff).

HMRC can also class you as dormant if you are a new limited company, but haven’t yet started trading. If this is the case, you will receive a letter from HMRC confirming dormancy.

If you are a dormant company, you may still receive a CT603 due to the following reasons:

• The timeframe on the notice refers to a period while you were actively trading
• HMRC may require a CT600 form to be filed illustrating that the business is dormant
• You are yet to call HMRC, informing them of your dormancy

Once you have sent your CT600, HMRC will not send you another notice if your business continues forward as dormant.

My business is insolvent -- why have I received a CT603 form?

If your business is facing formal insolvency action, such as a winding up petition or entering insolvency or an insolvency partnership, you will not be required to submit a corporation tax return.

If the business is facing informal striking off action, such as a Members' Voluntary Liquidation (MVL) and receives a CT603 form, you will be required to submit a CT600 form as your business is still solvent. A solvent business is able to meet financial obligations and as a result, it has a real prospect of recovery.

So what about CT600?

A corporation tax return calculates the amount of corporation tax payable.

This should be submitted 12 months after the end of the accounting period covered by the return. The corporation tax bill will be paid separate to the submission of the company tax return. This is paid nine months and one day after the end of the accounting period.

For example, if a company has a year-end of December 31st 2019, they must pay Corporation Tax by October 1st 2020 and file the Corporation Tax Return by December 31st 2020.

If you have no corporation tax due, you are still required to submit a CT600 form in order to inform HMRC. By doing so, they will update the system and stop sending payment reminders, hopefully!

Further particulars about the corporation tax return were outlined last week in the piece that inspired this piece, but to head off potential disappointment next week for other detail-oriented types, let’s say a bit more about the CT600; specifically its three main parts, or documents:

• Statutory accounts

This consists of the profit and loss accounts, balance sheet and director’s report. The director’s report includes information on business activity, company donations, employee policies and details of company officers, including appointments and resignations during the year.

• Computations

These are the calculations involved to work out the accounts.

• Tax Return

The main body of the tax return will include company details, capital allowances claimed, losses incurred and corporation tax due.

If you submit the tax return incorrectly, you will have a period of 12 months from the submission date to make changes. You may incur a fine from HMRC for incorrectly submitting the CT600 form.

Your accountant will typically take care of submitting your corporation tax return. However, it is your legal responsibility as a limited company director to ensure that the correct records are sent to HMRC and they are rightfully informed on the status of your business. With contractors proving themselves to have a good eye for detail, including if terms in an online article are not fully explained, this shouldn’t be too much of a problem, but do avoid complacency at all costs.