COM23170 - Assessing: CTSA assessments: revenue determinations

This subject is presented as follows

Determination of tax payable when no return delivered in response to a notice
For which periods can you make a Revenue Determination?
What will a determination determine?
Time limit for making a Revenue Determination
Review of cases for Revenue Determination
Determination where the notice to deliver is partly complied with
Instalment Payments
Company’s self assessment supersedes a Revenue Determination
Stranded Revenue Determinations 

Determination of tax payable when no return delivered in response to a notice

If a company fails to deliver a company tax return in response to a notice to deliver (Word 29KB), you may determine the amount of tax payable by the company to the best of your information and belief. This is a Revenue Determination under Paragraph 36 Sch 18 FA1998. You make the determination at any time after the filing date (Word 42KB), if it is ascertainable (Word 44KB).

If you cannot ascertain the filing date, you can only determine the company’s tax liability

• 18 months after the end of the specified period (Word 27KB) in the notice to deliver

• 3 months after the day on which the notice to deliver is served

In practice, we will normally review cases for Paragraph 36 determination only, 18 months after the end of the actual or assumed accounting date. But you may need to make a determination before then if you can ascertain the filing date and, for example

• Believe that there would be a risk of loss of tax if no immediate action was taken

• The company is a member of a group, and the failure to deliver the return prevents a proper review of other companies in the group

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For which periods can you make a Revenue Determination?

If you know of one or more APs ending within the specified period you can make a determination for each one that has an outstanding return.

If you are not sure what the company’s APs are, you can make a determination for whatever period or periods that you decide on, ending in the specified period.

When you use Function RAMA (Record / Amend Assessment) to make the determination, notice of the determination will be served on the company and show the date of issue.

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What will a determination determine?

The power to make a determination enables you to determine any amounts

• Included in the calculation of tax payable (Word 32KB) for an AP

• That form part of the calculation of any of those amounts

It may also be accompanied by a notice, under Paragraph 38(2), determining the dates on which amounts of tax are payable. For more information, see ‘Instalment Payments’ below.

Normally, a Revenue Determination

• Will include an estimated amount of profits and may include estimated amounts of particular types of profit
• May contain relief for losses, deficiencies and other amounts brought forward from a previous AP
• Will indicate the rate, or rates, at which tax is estimated to be due

Note: You should avoid making a Revenue Determination that includes only S455 CTA 2010 liability (formerly S419 ICTA 1988) (Close Company Loans to Participators). If you do so and subsequently agree that the company does not need to submit a return, COTAX may not allow you to reduce the Revenue Determination to nil.

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Time limit for making a Revenue Determination

You can make a Revenue Determination up to 3 years from the day on which you could have first exercised the power to do so. The determination has effect as if it was a self assessment, unless and until the company delivers its return and self assessment within the relevant time limit.

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Review of cases for Revenue Determination

You will routinely review cases for a determination at the tax-related (Word 30KB) penalties stage, normally 18 months after the end of the AP.

COTAX identifies those cases and puts them onto the Determination Required No Return List (DRNR) work list. You work the cases for your office from that list and use Function RAMA (Record / Amend Assessment) to make the Revenue Determination, or to indicate on COTAX that no determination is required. At the end of Function RAMA, COTAX gives you the following choice of options regarding penalties:

• Allow the automatic issue of penalties

• Proceed to Function PPEN (Prepare Penalty Determination) to issue or revise the penalty determination

• Set the ‘No Penalty Required’ indicator

Note: You should normally select the automatic issue of penalties option when it is available to you.

When you have taken action on both the tax and penalty determinations, COTAX automatically deletes the relevant entry from the work list. If you choose the option of allowing COTAX to issue the penalty automatically, the work list entry will be deleted 14 days later, when the automatic issue takes place.

For more information about

• DRNR work list see section ‘Assessing Work Lists’ (COM22000) in this business area
• Penalty determinations see the ‘Penalties’ business area

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Determination where the notice to deliver is partly complied with

If a company delivers a tax return for an AP ending within the period specified in a notice to deliver and you think that there is or may be an outstanding period (Word 28KB) for which the company has not made a return, you may determine the amount of tax payable by the company for the outstanding period to the best of your information and belief in accordance with Paragraph 37 Sch 18 FA 1998.

You can do that

• If you can ascertain the filing date for the outstanding period

• At any time after the filing date

• If you cannot ascertain the filing date for the outstanding period, after the later of

• 30 months after the end of the period specified in the notice to deliver

• 3 months after the day on which the notice is served

While Paragraph 37 does not prohibit you from making a determination for more than one period, Paragraph 40 (determination superseded by actual self assessment) does not contemplate that you will do so. You should therefore normally make only one Paragraph 37 determination at a time, in relation to any one specified period.

When you use Function RAMA (Record / Amend Assessment) to make the determination, notice of the determination will be served on the company and show the date of issue.

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Instalment Payments

Paragraph 38(2) Sch 18 FA1998 provides that a notice of Revenue Determination under Paragraph 36 or 37, may be accompanied by a notice determining the dates on which amounts of tax become due and payable under Sections 59D or 59E TMA 1970. The Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998 No. 1975) identify the companies that are required to make Quarterly Instalment Payments (Word 42KB). They do not refer to, or contain any procedural rules for determining the company’s status in the absence of a return. COTAX does not have a facility to issue a Paragraph 38(2) determination that tax is payable in instalments.

Liability (or not) to make instalment payments will normally be established from the company’s return. However, in some cases, you may need to determine that the tax charged by a Revenue Determination should have been paid in quarterly instalment payments. This will be so

• If the profits you are charging in the determination exceed unrestricted Upper Relevant Maximum Amount (URMA) (Word 27KB), the tax liability is above the statutory de minimis and it is clear that the company cannot benefit from the ‘newly large’ provisions

• In some cases that are less clear cut (for example where a company with smaller estimated profits is known or believed to have a large number of associated companies)

In such cases you will need to

• Set the Quarterly Payer signal (Word 31KB) to ‘Yes’ in Function RAMA. See the ‘Interest’ business area for the interest consequences of setting the quarterly payer signal

• Make a Paragraph 38(2) determination that tax is payable in instalments by using the free format message field in Function RAMA

Such a determination will be displaced if the company delivers a return containing information showing that the Instalment Payment provisions do not apply.

For more information about instalment payments, see the Company Taxation Manual (CTM) at CTM92505 onwards, and section ‘Quarterly Instalment Payments’ in the ‘Payments’ business area.

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Company’s self assessment supersedes a Revenue Determination

The company does not have a right of appeal against a Revenue Determination, but can supersede it with a self assessment by making a return within

• 3 years from the day on which the determination could first have been made

• 12 months from the actual date of the determination, if that is later

If the company delivers a return for any AP ending in the period specified by the notice to deliver, the self assessment contained in that return supersedesthe determination.

However, one self assessment can only replace one determination. If, exceptionally, we have made Revenue Determinations for more than one period ending within the period specified in the notice to deliver, the self assessment replaces the determination made for the period most closely matching the period covered by the return. The other determinations stand, unless and until the return is received for each relevant AP.

If a return is logged for the wrong period, unlogging the return reinstates the Revenue Determination.

If the company can demonstrate that there is no AP ending in the period specified by the notice to deliver for which (or for part of which) we have made a determination, or that it has delivered the necessary return or returns, or that the return is not yet due, the determination becomes of no effect. You then need to use Function RAMA to reduce the determination to nil.

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Stranded Revenue Determinations

A Revenue Determination may become stranded, that is, stored without a link (Word 30KB), in some circumstances. It is most likely to happen

• In new cases, where the company has not returned Form CT41G and you know nothing of its accounting intentions. See Stranded Revenue Determination Example 1 (Word 35KB) 

• In established cases, where the company changes its accounting date without telling you. See Stranded Revenue Determination Example 2 (Word 35KB) 

Note: COTAX does not alert you to the stranded determination when a return is logged. Technical Caseworkers should consider the possibility of a stranded determination in any case where determinations have been made and the AP record is subsequently changed. For more information see the ‘Accounting Periods’ business area.

For a list of forms relevant to this subject, see COM23011.

For a list of functions to use in particular situations, see COM23012.

For legislation applying to this subject, see COM23013.