IR26

9 March 1999

SELF ASSESSMENT FOR COMPANIES: MINOR CHANGES

To ensure that self assessment for companies works as intended, minor
amendments are being made to the relevant legislation included in
last year's Finance Act.

DETAILS

1. Self assessment for companies is being introduced for accounting
periods ending on or after 1 July 1999. The legislation for self
assessment, and for the new system of quarterly instalment payments
of corporation tax for large companies which will apply for the same
accounting periods, was included in the 1998 Finance Act.

2. Most of the amendments insert or correct cross-references and
repeal provisions which have been replaced by the new rules.

3. In addition amendments will 
   
   - ensure that the existing rules for recovering tax arising from 
     an incorrect group relief claim apply for self assessment; 

   - allow a penalty to be charged when a person fails to provide 
     information required under regulations concerning payment of
     corporation tax by instalments; 

   - ensure that the correct amount of interest is paid where tax 
     charged on a company controlled by a small number of 
     shareholders in respect of a loan made to one of those
     shareholders is repaid because the loan has been released or 
     written off.

NOTES FOR EDITORS

1. Companies already have to work out their own tax bills under the
existing Corporation Tax Pay and file system which came into effect
from 1 October 1993. So the move to full self assessment for them
will be a relatively small further step.

2. Self assessment for companies does not change the basic rules for
paying tax and filing tax returns. But a company's tax return will in
future contain a self assessment of its tax liability for the
relevant accounting period. Unless the Inland Revenue make enquiries
into the tax return, the company's tax position will normally be
regarded as finalised 12 months after the filing date for the tax
return.

3. The group relief rules enable companies to obtain relief for
trading and some other losses by surrendering those losses to other
companies in their groups. The rules also cover consortia.

4. Circumstances may arise where a company which should have paid its
corporation tax by instalments does not do so, or makes inadequate
instalment payments. The Inland Revenue may, after the company has
filed its return, or the Inland Revenue have determined its
liability, wish to establish the reasons for this by asking the
company to produce relevant information or records. If the company
does not provide these, the Inland Revenue may use its statutory
powers to require their production. The effect of the amendment is
that failure to supply such information will lead, under an existing
Taxes Management Act provision, to a fixed initial penalty which may
be followed by a daily penalty which may continue until the
information or records are produced.

5. Where a company controlled by a small number of shareholders makes
a loan or advance to one of those shareholders, tax equal to 25 per
cent of the loan or advance is charged on the company. This tax is
repaid if the loan is repaid, released or written off.

INLAND REVENUE PRESS OFFICE
Media enquiries to:      0171 438 6692/6706/7327
(Out of hours:0860 359544)

Non-media enquiries to:  0171 438 6420/6425
(Office hours only)

Inland Revenue information is on the Internet:
www.inlandrevenue.gov.uk

# = pounds sterling