Annex 1: Minor changes in the law Change 1: Small profits rate and marginal relief: drop the need for a claim:sections 18, 19, 20 and 21
This change removes the requirement that a company should make a claim for small profits rate or marginal relief.
Section 13(1) of ICTA provides that a company “may claim” that its basic profits are charged at the small companies’ rate. And section 13(2) makes the same provision for marginal small companies’ relief. The general approach of this Act is not to require a claim if the relief can be shown in a return.
In practice a claim for small companies’ relief is usually made in a return, by putting an “X” in a box. In accordance with SP1/91, HMRC accept that such an entry is a valid claim.
The provisions that govern claims are not the same as the provisions that govern returns. But in practice dropping the need for a claim has only the following two consequences, both of which relate to the time available for “claiming” the relief.
First, the absolute time limit for making a claim is replaced by a time limit that may vary according to the particular circumstances. That may be because the return is issued late or because the taxpayer makes a late return. Accordingly, HMRC are no longer able to refuse a claim because it is late by reference to an absolute time limit: returns time limits and sanctions apply and they depend on the date the return is issued and made.
Second, mistake relief claims under paragraph 51 of Schedule 18 to FA 1998 are possible if too much tax is paid as a result of omitting to include the relief in the tax return. Claims under paragraph 51 of Schedule 18 to FA 1998 must be made within six years of the end of the accounting period to which the return relates.
This change is in taxpayers’ favour in principle and may benefit some taxpayers in practice. But the numbers affected and the practical effects are likely to be small.