HMRC has launched a letter campaign aimed at companies that may have made mistakes when claiming corporation tax marginal relief. If your business receives one of these letters, it’s essential to respond within 30 days even if you believe your corporation tax return is correct. Ignoring HMRC’s request could trigger a compliance check and potentially lead to penalties.
The current campaign is focused on cases where companies have associated companies but did not declare them when claiming Marginal Relief.
Since April 2023, earnings above £250,000 have been taxed at 25% and those below £50,000 at 19%. Marginal Relief applies to taxable profits between £50,000 and £250,000 (although it effectively gives rise to a tax rate of 26.5%) by dividing the £50,000 and £250,000 thresholds between associated companies.
If this applies to your company, your corporation tax calculation may be wrong, and you could owe additional tax.
What business owners should do next
- Check past returns: Review corporation tax returns for all periods starting from 1 April 2023.
- Amend errors: If you are within 12 months of your filing date, you can correct mistakes online.
- Make a voluntary disclosure: If you are out of time to amend, HMRC expects you to disclose any errors.
- Get advice: A qualified tax adviser or accountant can ensure your filings are correct to minimise risk.
HMRC will continue sending these letters until October 2025. Even if you haven’t received one yet, it’s worth reviewing your position if your business has associated companies.
Being proactive now can help you avoid unnecessary penalties and ensure your tax affairs are fully compliant.
