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The conundrum of the detailed profit and loss account

Do you need to submit a detailed profit and loss account with a corporation tax return?
There is no requirement in the Companies Act or accounting standards, directly or indirectly, to include a detailed profit and loss account with a company’s annual accounts.

There is no specific HMRC requirement to include a detailed profit and loss account with a corporation tax return. The term detailed profit and loss account is not defined in law. There is no prescribed format and no prescribed level of detail. This is made clear on HMRC's web site at
www.hmrc.gov.uk/manuals/ctmanual/CTM93180.htm

There is requirement to include with a corporation tax return details of how numbers in the tax computation are calculated from the annual accounts (see
www.hmrc.gov.uk/manuals/ctmanual/CTM93210.htm). However, a detailed profit and loss account virtually never serves this purpose. For instance, it is simply not possible to calculate the amount of entertaining expenses from a company’s annual accounts. The information is not there, just the total of administration expenses.

HMRC’s computers will not reject a corporation tax return because it does not contain a detailed profit and loss account. However, some tax offices have in the past rejected returns after submission because they did not contain a detailed profit and loss account. In June 2011 HMRC informed VT that the consensus within HMRC was that a corporation tax return should not be rejected solely on the basis that it did not contain a detailed profit and loss account, and that steps were being taken to communicate this to the wider HMRC. However, HMRC emphasised that they very much wanted a detailed profit and loss account to be included with a corporation tax return.

Should the detailed profit and loss account be included in the annual accounts iXBRL file or the tax computation iXBRL file?
Either is acceptable to HMRC although they have a preference for the latter. In VT's experience, small and medium sized companies tend to include the detailed profit and loss account as an attachment to the annual accounts.

Does the detailed profit and loss account need to be tagged?
Yes.

Summary
It is not surprising that the detailed profit and loss account is causing confusion:

  1. HMRC do not have a legal right to require a detailed profit and loss account as part of the corporation tax return but clearly expect one

  2. HMRC should not reject a return that does not include a detailed profit and loss account but they have been known to do so

  3. The detailed profit and loss account can be included as part of the accounts iXBRL file or the tax computation iXBRL file. Most companies do the former, but HMRC have expressed a preference for the latter

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