How to claim a corporation tax refund

Paying corporation tax is mandatory for UK limited companies, as well as some unincorporated organisations such as clubs and associations. But there are circumstances where you may be able to claim a refund on your CT tax bill.

In some specific situations, His Majesty’s Revenue & Customs (HMRC) may end up owing you money – a happy situation to be in! But how do you claim a corporation tax refund? And how long does it take for HMRC to refund corporation tax?

Let’s find out more about getting a corporation tax refund from HMRC, and the process you’ll go through to get this bonus injection to your cash flow.

What is a corporation tax refund and when can you claim it?

Corporation tax (CT) is paid either annually or quarterly, depending on the size of your business. This means paying 25% of your taxable profits to HMRC, or 19% if you’re a qualifying smaller business.

However, there are ways to claim a corporation tax refund, allowing you to recoup some of the CT you’ve previously paid to HMRC.

You might get a rebate on your corporation tax bill in these key circumstances:

• Overpayment of tax: Miscalculations can happen and you may overpay your CT. If you’ve paid more tax than your company owed for a particular accounting period, HMRC will refund the excess.
• Trading losses: You can offset current period losses against profits from the same period, or carry them back to the previous 12 months. This generates a refund from HMRC when you notify them of the loss.
• Terminal losses: If your company ceases trading, you can claim Terminal Loss Relief for trading losses incurred in the final 12 months of trade. These losses can be carried back and set off against profits of the previous three years, providing the company carried out the same trade in those earlier periods.
• Research and Development (R&D) Tax Credits: Companies investing in qualifying R&D can claim R&D tax credits against this expenditure. Applying for an R&D tax credit can reduce tax, or result in a cash payment, if loss-making.
• Creative Industry Tax Reliefs: Tax relief for the creative industries can be claimed. These tax reliefs exist for film, TV, animation, video games, theatre, orchestras and museums/galleries, potentially leading to a cash rebate.

Claiming these rebates and reliefs in a timely way gives you an unexpected injection of capital, helping you to manage your cash flow and fund your growth.

Can I get a corporation tax refund if I made a trading loss?

Yes, you can claim a corporation tax (CT) refund if you’re a UK limited company (or an unincorporated organisation) that pays CT.

Usually, you’ll be able to get a CT refund if you’ve overpaid the CT that was due, are loss-making and have offset it against any total profits made in the preceding 12 months, or you’re closing the company and are eligible to claim Terminal Loss Relief (see above).

How to claim a corporation tax refund from HMRC

To make a claim for a CT refund you must be registered for corporation tax and have a Government Gateway account and a unique tax reference (UTR) for the company.

If you’ve filed your CT600 form and have already paid your corporation tax, you’re in a position where you may be eligible for a CT refund. 

Let’s look at the steps for making a claim:

1. Log in to your HMRC company tax account:

Go to the GOV.UK website and log in using your Government Gateway user ID and password. Once logged in, navigate your way to the corporation tax section.

2. Access the relevant company tax Return (CT600):

Find the relevant accounting period for the amendment you want to make and claim the refund. You'll find an option to ‘View’ or ‘Amend’ previously submitted returns.

3. Prepare the amended return:

If you’re using HMRC's free online filing service: The system should allow you to open the previously submitted return. Make the necessary changes to the relevant boxes in the CT600 form, as well as your accounts and tax computations.

If using commercial tax software: Open your company file within your software. Select the relevant accounting period. Make the corrections to your accounts, tax computations and the CT600 form. Your software will generally have an option to mark the return as ‘Amended’ or ‘Revised’.

4. Complete the relevant sections for the refund/relief:

Next, you’ll need to complete the required sections relating to the refund or relief that you’re aiming to claim:

• For overpayments/errors: Adjust the figures in the CT600 tax form to reflect the correct, lower tax liability. Make sure the section calculating the tax due accurately shows an overpayment.
• For trading losses (carry-back): Typically, you’ll need to input the amount of the loss arising in the current period and then specify how much of that loss you’re carrying back to the previous period(s). Do this by filling out the relevant boxes of the CT600. For example, if you’re carrying back a loss to the previous year, this will reduce the profits of that earlier period, leading to a recalculation of its tax.
• For R&D tax credits: Complete the relevant supplementary pages (CT600L for R&D) and make sure the credit is applied correctly to reduce your tax liability or generate a payable credit.

5. Provide your bank details for the refund:

This part is vital. Check that your company's business bank account details (sort code and account number) are entered correctly in the designated section of the CT600 form. This is how HMRC will make the direct payment to your company. If you don't provide details, HMRC might use the refund to offset other taxes you owe.

6. Mark as amended and submit to HMRC:

On the CT600 form, there will be a specific box or declaration to confirm that this is an ‘Amended’ or ‘Revised’ return. Make sure the relevant box is ticked.

Review all figures carefully and then submit the amended CT600 and any revised accounts/computations to HMRC.

If your refund isn’t issued automatically, you may need to contact HMRC to request that the refund is processed and the money paid to your company..

How long does a corporation tax refund take to arrive?

General advice is to allow at least six weeks for HMRC to process your claim for a CT refund from the point that you submit the claim. 

However, it can take as long as 12 weeks for a claim to be processed, and several weeks after that for the money to be paid to your business bank account. It pays to be patient and polite when chasing your claim

After six weeks, if you’ve received no communications re the refund, it’s advisable to chase up the claim.

HMRC has a dedicated page for checking when you can expect a reply to your tax enquiry. Head to the 'When you can expect a reply' page.

You can also call the Corporation Tax Hotline on 0300 200 3410, Monday to Friday, 8am to 6pm, or speak with HMRC’s Digital Assistant to ask basic queries about your corporation tax

How long does HMRC take to process a corporation tax refund?

It can take between six to 12 weeks for your CT refund to be processed by HMRC. You can chase for a response after six weeks, but bear in mind that HMRC is under-resourced and dealing with a large workload of claims.

Common reasons your corporation tax refund may be delayed

Filling out and amending your CT600 form to claim a refund or CT relief can be complicated if you’re not familiar with accounting terminology.

However, it’s important to be as accurate as possible and to include the correct information, figures and data wherever possible. Failing to do so can be one of the key reasons why your CT refund is delayed.

Here are some of the most common reasons for a delay to your refund:

• Missing or incorrect details on your claim: If your business information or quoted figures are wrong, this will cause problems with your claim. 
• HMRC queries or investigations slowing processing: If HMRC is querying any of the details of the claim, or is currently running an investigation into your tax affairs, this will slow down the claim process considerably. 
• High volume of refund claims at year-end periods: During common year-end periods, HMRC will be exceptionally busy with CT claims. Bear this in mind and be polite when chasing up your own claim for a refund.

To ensure your claim isn’t delayed longer than necessary, be sure to:

• Submit accurate figures, data and business information
• Check all figures before submitting the claim
• Work with an accountant or tax agent to ensure the professional quality of your amendments to the CT600 form

What to do while waiting for your HMRC corporation tax refund

Patience is a key trait when dealing with HMRC. Claims can take time and the much-needed refund may take a while to appear. 

But this waiting time needn’t be wasted. There are plenty of things you can do while you’re waiting for the refund that will be beneficial to the business. 

For example:

• Follow-up with HMRC after a reasonable wait: Leave at least six weeks before chasing HMRC for a response. 
• Get proactive with cash-flow forecasting: Consider running cash flow projections and forecasts for the coming period, to manage your cash position and get an idea of your cash runway in the time leading up to the refund.
• Concentrate on short-term financial planning: Review your balance sheet, cashflow and profit and loss figures and look for opportunities to boost revenue, cut costs and get your cashflow in a positive position. 

Can a business loan help cover cash flow gaps while you wait?

Waiting for your CT refund to be processed and paid can be frustrating, especially if the refund is a critical element in your cash flow planning for the coming period.

Taking out a short-term small business loan is one way to bridge the cash flow gap and keep your finances on track.

A flexible loan, like an iwoca Flexi-Loan, allows you to borrow the money you need now, so you can pay it back over an agreed timeframe. This keeps your cash flow looking positive while you wait for HMRC to process your refund.

Unlike some of the larger high-street banks, you can pay back your loan early without any early repayment penalties. And you only pay interest on the funds you draw down from your total loan amount.

What are my options if my refund is delayed?

If your refund is delayed, this can cause cash flow issues for the business. A fast solution to this cash flow gap is to take out a flexible small business loan with a specialist provider, like iwoca. 

This short-term loan bridges the gap and keeps you cash positive.

How to treat corporation tax refunds in your accounts

It’s vital that you record CT refunds correctly in your company accounts. This keeps your accounts correct and transparent, and also keeps you compliant with HMRC’s rules around corporation tax submissions.

Let’s look at the key ways to account for the refund:

1. Accounting treatment: 

A CT refund is typically treated as a reversal of a previous expense. It's debited to the ‘Corporation Tax liability’ account (reducing the amount owed) and is then credited to your profit and loss (P&L) statement to reduce the overall tax charge. Any interest received is accounted for as taxable income.

2. Implications for your profit & loss: 

A refund effectively reduces your total corporation tax expense for the relevant period. This increases the ‘Profit for the financial year’ (net profit after tax), providing a more accurate reflection of the company's profitability.

3. Importance for your compliance and planning: 

Correctly recording refunds means you remain compliant with HMRC’s rules, preventing any potential penalties and investigations. It also provides the true and accurate financial data that’s crucial for insightful cash-flow management, strategic decision-making and securing future funding.

iwoca: bridging the cash flow gap till your refund arrives

With CT refunds taking as long as 12 weeks, or longer, to be processed and paid, this wait can put pressure on your cash flow position. 

A Flexi-Loan from iwoca quickly gets you the capital you need, easing the pressure while you wait for HMRC to pay your refund. 

With a Flexi-Loan, you can:

• Borrow from £1,000 to £1 million
• Pay it back from 1 day to 60 months
• Pay no penalties for early payment

Apply for a Flexi-Loan today

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