Corporation Tax Dispute Solicitors
HMRC enquiries into corporation tax returns — into R&D claims, transfer pricing, group relief, or the deductibility of specific expenses — can result in substantial additional tax, interest, and penalties. A solicitor will challenge the enquiry and protect the company's position.
Corporation tax disputes arise from HMRC enquiries opened under s.9A CTA 2010 — reviewing the company's tax return and potentially challenging the treatment of income, expenses, capital allowances, R&D tax credits, group relief, loss carry-forwards, and transfer pricing. Large company enquiries are often managed by HMRC's Large Business directorate using a collaborative compliance approach; SME enquiries may proceed more aggressively. A solicitor will advise on the scope of HMRC's enquiry, the legal basis for the company's tax treatment, and the most effective strategy to achieve resolution — negotiation, internal review, or First-tier Tribunal appeal.
Corporation Tax Disputes — Key Issues
Corporation tax disputes — the areas HMRC most commonly challenges and how a solicitor responds.
Corporation tax enquiries cover a wide range of issues — from technical questions about the deductibility of a specific expense to complex disputes about transfer pricing or the availability of R&D relief. A solicitor will identify the correct legal position and present it effectively to HMRC and the tribunal.
R&D tax credit disputes — HMRC challenging the qualifying expenditure
Research and Development (R&D) tax credits allow qualifying companies to claim an enhanced deduction (or a cash credit) for qualifying R&D expenditure — expenditure on resolving scientific or technological uncertainty in the development or improvement of products, processes, or services. HMRC has significantly increased the volume of R&D enquiries following perceived abuse of the scheme. HMRC challenges claims on the basis that the activities do not constitute qualifying R&D, that the costs claimed are not qualifying costs, or that the claim was made outside the time limit. A solicitor will assess the qualifying activities and costs, prepare the technical narrative, and challenge HMRC's disallowance at the First-tier Tribunal where the claim is correctly made.
Transfer pricing — HMRC challenging intra-group transactions
Transfer pricing rules require intra-group transactions — sales of goods, provision of services, loans, IP licensing — between related parties to be priced at arm's length (the price that would have been agreed between independent parties in comparable circumstances). Where HMRC believes intra-group transactions are not at arm's length, it adjusts the taxable profit of the UK company upward — potentially resulting in significant additional corporation tax. Transfer pricing disputes are technically complex — requiring expert economic analysis of the comparable transactions and the appropriate pricing method. A solicitor will manage the HMRC enquiry, commission expert transfer pricing analysis, and present the arm's length position at the First-tier Tribunal.
Loss relief disputes — carry-back, carry-forward, and group relief
Corporation tax losses can be carried back against prior year profits, carried forward against future profits, or surrendered to other group companies as group relief. HMRC frequently challenges loss relief claims — disputing the amount of the loss, whether the loss is a trading loss (qualifying for carry-back and group relief) or a capital loss (carry-forward against capital gains only), or whether the conditions for group relief are met. Anti-avoidance provisions (s.673 et seq CTA 2010) can also restrict the use of carried-forward losses following a change in ownership. A solicitor will challenge HMRC's disallowance of loss relief claims and ensure all available losses are used as effectively as possible.
Capital allowances disputes — HMRC denying the deduction on fixed assets
Capital allowances provide a tax deduction for expenditure on qualifying capital assets — plant and machinery, structures and buildings, and other qualifying assets. HMRC disputes capital allowance claims where it considers that: the item is not plant or machinery (it is a structure or the building itself); the expenditure does not qualify (it is repairs rather than capital improvement); or the annual investment allowance (AIA) or writing-down allowance (WDA) calculation is incorrect. Land remediation relief, enhanced capital allowances for energy-efficient equipment, and first-year allowances for electric vehicles are also areas of frequent HMRC challenge. A solicitor will identify the correct allowances and challenge HMRC's disallowance.
Deductibility of expenses — HMRC challenging the "wholly and exclusively" rule
Corporation tax deductions are only available for expenditure incurred "wholly and exclusively" for the purposes of the trade (s.54 CTA 2009). HMRC frequently challenges the deductibility of expenses — directors' remuneration (challenging whether the level of pay is commercially justifiable for the services provided), management charges (intra-group charges for services provided by a parent or holding company), and costs with a dual purpose (entertainment expenditure, costs with a personal element). A solicitor will present the factual basis for the deductibility of the expense — demonstrating that it was incurred wholly and exclusively for the company's trading purposes — and challenge HMRC's disallowance where it is incorrect.
Discovery assessments and the closure notice — managing enquiry timelines
An HMRC enquiry under s.9A CTA 2010 can remain open indefinitely unless HMRC issues a closure notice — confirming that it has concluded the enquiry and setting out any amendments to the return. Where HMRC is taking unreasonably long to close the enquiry — particularly where the evidence has been provided and there is no good reason for delay — a taxpayer can apply to the First-tier Tribunal for a direction requiring HMRC to issue the closure notice. A solicitor will assess whether the enquiry timeline is reasonable, manage the evidence provision to HMRC, and apply to the tribunal for a closure notice direction where appropriate — bringing the enquiry to a resolution.