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Where Taxpayers and Advisers Meet

Corporation tax relief on historic vat liability

Aidan Smyth
Posts:9
Joined:Tue Jun 06, 2017 7:17 pm
Corporation tax relief on historic vat liability

Postby Aidan Smyth » Fri Dec 15, 2017 7:18 am

My client runs 4 franchise outlets for a high street name multi national fast food company. The company has recently settled a long standing dispute going back to 2008 as regards the VAT liability of some of its products. My client therefore has to pay approx £20k per outlet. My questions are can they claim corporate tax relief on the additional liability (which effectively reduces their sales) and if so in which period do they claim i.e. do they claim in the period they pay the VAT or must we unsettle all years for the VAT due each year going back to 2008?

Thank you in advance

RMC
Posts:435
Joined:Wed Aug 06, 2008 3:35 pm

Re: Corporation tax relief on historic vat liability

Postby RMC » Tue Dec 26, 2017 4:44 pm

The VAT liability probably consists of output VAT under-declated + penalties + interest.
The output VAT relates to sales.
Interest is allowable for Corporation Tax purposes, although not allowable for income tax.
Penalties are not allowable.

So, the best course of action be would seem to be showing the total payable in the accounts as a prior year adjustment and disallowing the penalties in tax computation.


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