Getting a Refund or Interest on Corporation Tax

If your company has overpaid Corporation Tax, you're entitled to a refund from HMRC, and you may also receive interest on the overpayment. This guide explains how to claim your refund, when HMRC pays interest on overpayments, and how overpayment relief works if you discover a...

Introduction

How to claim a Corporation Tax refund

Use your Company Tax Return to tell HMRC you're due a refund (officially called a 'repayment') and specify how you want to receive the money.

To get your refund processed quickly, include your bank details (account number and sort code) on your Company Tax Return. HMRC will then automatically transfer what you're owed directly to your bank account. You should provide these details on every return to avoid delays.

How HMRC processes your refund

Before issuing a refund, HMRC will use any money you're owed to pay off other debts your company has with them. This includes:

Other taxes you owe, such as PAYE or VAT
Your next Corporation Tax bill
Late filing penalties (if you don't enter a repayment limit on your next return)

Once these debts are cleared, HMRC will refund the remaining amount. If part of your repayment is used to pay debts, you'll see confirmation in your business tax account.

HMRC will send your refund by one of these methods:

Direct to your bank or building society account using Bacs
To the original payment card you used
As a payable order sent to your registered company address

Interest on Corporation Tax overpayments

HMRC pays interest on overpaid Corporation Tax at a rate of 2.75%. You'll receive interest in two situations: when you've paid tax early, or when you've paid more than your company actually owes.

Important: This interest counts as taxable income, so you must include it in your Company Tax Return.

Interest on early payments

If you pay Corporation Tax before the deadline, HMRC will usually pay interest from the date you made the payment to the official payment deadline.

The earliest date HMRC will pay interest from is 6 months and 13 days after the start of your accounting period (the time covered by your Company Tax Return).

Interest on overpayments

When you've paid more than you owe, HMRC calculates interest from whichever is later:

The date the tax was due
The date you actually paid the tax (if you paid late)

Interest for companies paying by instalments

If your company pays Corporation Tax in quarterly instalments, HMRC calculates and pays your interest automatically once they know your final Corporation Tax bill for the accounting period. This normally happens when you file your Company Tax Return.

For instalment payers, interest is calculated from the later of:

The first instalment date
The date your balance exceeded what you actually owed

Claiming overpayment relief

Overpayment relief is a formal process for claiming back Corporation Tax if you discover you've overpaid in a previous accounting period due to a mistake in your return.

Who can claim

You can only claim overpayment relief if, for the accounting period in question, you've either:

Paid Corporation Tax, or
Been assessed to pay Corporation Tax

Accountants and agents cannot make overpayment relief claims on your behalf—the company must claim directly.

HMRC will reject your claim if certain exclusions apply. These exclusions are detailed in HMRC's internal manual.

Time limits for claiming

You have 4 years from the end of the relevant accounting period to make your claim. Miss this deadline and you lose the right to claim.

Before you claim

HMRC provides an online tool to help you check whether you should make a claim. To use this tool, you'll need to know:

The end date of the accounting period where the mistake occurred
Whether you paid Corporation Tax for this period
Whether you've been assessed to pay Corporation Tax for this period
Whether you under-declared a loss
Whether you submitted a return
Whether any exclusions apply to your situation
Whether the mistake affected other accounting periods (for example, if an under-declared loss was carried forward)

Making your claim

Claims for overpayment relief must be submitted in a specific format set out in HMRC's Self Assessment Claims Manual. If you don't follow the correct format, your claim risks being rejected or delayed, and you could miss the deadline for claiming.

HMRC may open an enquiry into your claim and ask for supporting evidence, such as:

Documentary proof of tax deductions
Evidence that tax was paid or suffered in some other way

To avoid errors, review HMRC's overpayment relief guidance before submitting your claim.

Other options to reduce your tax bill

Before claiming a refund, check whether you could reduce your Corporation Tax liability by claiming allowances or reliefs you may have missed. This could include capital allowances, research and development relief, or other deductions your company is entitled to.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.