Taxation - Self-assessment system slated
The Inland Revenue has been accused of ‘not living in the real world’ by tax managers preparing for the first payment deadline under the new corporation tax self-assessment system.
Around 10,000 UK companies are affected by the 14 July deadline requiring them to pay the first instalment of their tax liability this year. This involves estimating six months of profits yet to be made. Any tax found to have been underpaid would be subject to a 7% interest charge.
Tax managers said they made their ‘best guess’ at liabilities, but criticised the Revenue for failing to understand the complexity of businesses. Under the old system, companies had nine months after the end of their accounting period to pay. Retailers face the challenge of predicting the Christmas rush, while construction companies, for example, find it difficult to predict how much profit they can book from a project in six months time.
Les Angell, group tax manager at John Laing, said: ‘We have done all the things we believe we ought to, but it’s a guess as we don’t know what profits we will end up with.’
Iain Stewart, KPMG tax partner, sympathised. He said: ‘If a company’s figures exceed expectations then previous instalment payments missed will have to be made good with a substantial interest charge resulting. An unexpected large capital gain will throw the predicted figures out. It is a difficult situation to get right.’