EXPLANATORY NOTE

This clause makes two changes that have effect for accounting periods ending on or after 1 July 1999. The first allows an existing penalty provision to apply in cases where a company has failed to provide information required under regulations concerning payment of corporation tax by instalments. The second alters a statutory cross reference in a provision that allows a company to surrender a tax refund to another company in the same group. This change is a consequence of the introduction, by Finance Act 1998, of new rules for payment of corporation tax.

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Subsection (1) provides for section 98 TMA 1970 to apply to regulations governing the payment of corporation tax by instalments. This will allow the Inland Revenue to seek penalties where a company fails to provide, or provides incorrect, information, records or other documents which it has been required to produce by notice, or otherwise fails to comply in connection with enquiries into the application to the company of the instalment regulations.

Subsection (2) amends a statutory cross reference in section 102 FA 1989, the provision which allows for the surrender of a company tax refund within a group. The amended cross reference is to the new rules for the payment of corporation tax, which replace those that apply for CT Pay & File accounting periods.

Subsection (3) makes these changes effective in relation to accounting periods ending on or after 1 July 1999, i.e. to periods to which the self assessment rules and quarterly instalment payment regulations apply.

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Self assessment for companies (CTSA) is being introduced for accounting periods ending on or after 1 July 1999. The core provisions for CTSA are set out in Schedule 18 FA 1998, with minor and consequential amendments dealt with in Schedule 19 of the same Act.

Much of the legislation needed had already been enacted in previous Finance Acts, but bringing both the old and the new provisions together in one Schedule allowed them to be reordered in a more logical way.

Schedule 18 includes provisions dealing with:

the tax return, including a self assessment, to be made by a company;

procedures for amending and enquiring into a return;

Inland Revenue determinations and assessments;

claims, including claims to group relief and capital allowances.

Finance Act 1998 also included -

the legislation and regulation making powers needed to introduce the new system of quarterly instalment payments of corporation tax for large companies, which will apply for the same accounting periods, and,

the legislation abolishing ACT for qualifying distributions made on or after 6 April 1999 and providing for regulations to be made concerning shadow ACT.

The changes made by clauses 80 to 84, and by Schedule 11, correct omissions, and make the minor and consequential amendments to remedy minor technical defects that have been identified since Schedule 3 FA 1998 (dealing with ACT abolition consequentials), and Schedule 19 FA 1998 (dealing with CTSA consequentials) were enacted.

For accounting periods ending on or after 1 July 1999, large companies are required to pay tax in quarterly instalments (Quarterly Instalment Payments).

Quarterly Instalment Payments (QIPs) apply to large companies only, that is to companies whose profits for an accounting period exceed the Section 13 ICTA 1998 ‘upper relevant maximum amount’ which is in force at the end of that period (it is currently set at £1.5 million).

Under Regulation 10 of the Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998 No 3175), the Board of Inland Revenue may, by notice to the company at any time after the filing date, require it to provide such information as may reasonably be required about the computation of any QIPs made by the company, the reasons for any failure to make QIPs, and any claim to repayment under Regulation 6.

There is a similar power under Regulation 11 to require the company to produce "books, documents and other records in its possession or power" for the same purposes. The company may produce copies instead of originals, but the copies must be photographic or other facsimiles and an officer of the Board may require the originals to be made available for inspection under Regulation 12.

The Inland Revenue will seek to use these information powers only where there are indications that a company has deliberately or recklessly failed to comply with its payment obligations under the regulations, or has fraudulently or negligently made a claim for repayment.