Alphatax UK Release Notes. Version T: E: W:

Transcription

1 Alphatax UK Release Notes Version T: E: W:

2 1. Introduction... 4 About Version Technical Support Important notices... 4 Deductions allowance Installation... 5 Installation key... 5 Downloading and installing Alphatax... 5 Templates... 5 Alphatax platform support Finance Act Research and development expenditure credit... 6 Indexation allowance... 6 Enhanced capital allowances credit... 6 Double taxation relief... 7 Corporate interest restriction... 7 Partnership reforms... 8 Bank levy reform... 8 Venture capital trusts Finance (No. 2) Act Carried forward loss relief Corporate interest restriction Returns and forms PDF forms CT Non-resident company Tax Return Partnership Tax Return Annual tax on enveloped dwellings E-Filing Specialist companies Creative industries Non-resident landlords Partnerships Northern Ireland rate of corporation tax Life assurance companies Miscellaneous changes

3 Pensions Diagnostics Patent box Tax categoriser Capital allowances Group relief Restitution interest Optional Modules Tax Accounting New CCM Dashboard Enabling the CCM Dashboard Interactive charts Setting your default CCM System changes Alphatax Enterprise changes Miscellaneous system changes Appendix A - Deductions allowance allocation Appendix B - Pensions contributions

4 1. Introduction About Version Welcome to the version edition of Alphatax UK. This release includes the following features: Changes in response to Finance Act 2018 Further enhancements from Finance (No.2) Act 2017 Updates for the latest versions of forms CT600, SA700 and SA800 The new and enhanced CCM Dashboard Some minor changes to resolve customer issues Technical Support We provide a technical support help desk for users requiring assistance. The help desk can be contacted by telephone between the hours of 9.00 am and 5.30 pm, Monday to Friday excluding public holidays. If a consultant is not available to speak with you immediately, every effort will be made to return your call within one hour. If you require help or further information, please contact the support team on: UK: Tel: +44(0) support@taxsystems.com Ireland: Tel: +353 (0) support@taxsystems.ie Please note: We recommend that you use the Support option from the Help to send copies of the computation directly to Support. 2. Important notices Deductions allowance This edition of Alphatax includes an important change to the allocation of the deductions allowance between Trading and Non-trading streams within the carried forward loss restriction calculation. Please see page 10 for full details. Please note: This change potentially affects the corporation tax liability of companies with accounting periods ending on or after 1 April We have therefore created a report that may be run before upgrading and then again after, should you wish to identify any company computations affected. Please contact our Support team for information on this process. 4

5 3. Installation Installation key Your 16-digit Alphatax installation key is provided in the that you received announcing the release. The Alphatax installation key is required to both download and install Alphatax. Should you have any queries, please contact the support team on or at Downloading and installing Alphatax Please download the copy of Alphatax from the releases download site which will require you to enter your address and your 16-digit Alphatax installation key. This process will generate an automated with a unique URL which will be sent to your address. The URL will allow you to download the Alphatax installer along with other applications which you are registered to use together with the installation guides and release notes. Click on Alphatax v exe to initiate the installation process for which the Alphatax installation key will again be required. Press the Enter key at the prompts. The installation process will override the old version of Alphatax. For detailed information on the installation process refer to the Alphatax UK Installation Guide in the user documentation section of the download screen. Enterprise users, using the Oracle or Microsoft SQL databases, should also run the database update script from within the Enterprise Manager utility. The database version is now 35. The Enterprise Manager is automatically extracted from within the Alphatax Installer package. Templates The installation will reinstall the standard Alphatax templates to ensure that you have the latest version. To allow you to retrieve your own versions of these templates, if applicable, the old templates will automatically be saved to a new folder called BACKUPXn (where n is a number incremented for each new installation). Please note: This part of the process may take some time. A progress bar displays the names of templates as they are being copied. Folders called BACKUPXn created in the version 17.0 release are removed with this release. Alphatax platform support Operating Systems Alphatax is supported on Windows 7 and later operating systems. SQL Server Alphatax Enterprise is supported on SQL Server 2008 and later versions. 5

6 4. Finance Act 2018 Research and development expenditure credit The rate of the above the line research and development expenditure credit (RDEC) has been increased from 11% to 12% for expenditure incurred on or after 1 January The R&D expenditure credits input statement in Alphatax has been updated to use the new rate from the appropriate date. Indexation allowance The indexation allowance rules under s54 TCGA 1992 for companies disposing of chargeable assets have been changed by Finance Act For disposals on or after 1 January 2018 of assets acquired before 1 January 2018, any indexation allowance is calculated using the retail price index (RPI) for December 2017, irrespective of the date of disposal of the asset. Therefore, no relief will be available for inflation accruing after December For disposals of assets acquired on or after 1 January 2018, indexation allowance is not available. In Alphatax we have updated the capital disposal, share pool, and revalued capital assets statements such that for disposals on or after 1 January 2018 of assets acquired before 1 January 2018, indexation allowance will be calculated using the retail price index for December For assets acquired after this date, inputs and report mode presentation relating to indexation allowance have been removed entirely. Enhanced capital allowances credit Finance Act 2018 has made amendments to the first-year tax credits provisions under Schedule A1 CAA These provisions provide a payable tax credit to companies who have a surrenderable loss in a period and who have incurred qualifying expenditure on energysaving plant and machinery. The amendments extend the time period over which a claim for a credit may be made by five years from 31 March 2018 to 31 March The percentage used in the calculation of the amount of the first-year tax credit has also been amended. The tax-credit was previously given as 19% of the surrenderable loss, but this percentage has been changed to be two-thirds of the rate of corporation tax applicable to the qualifying activity. This change applies with effect from 1 April 2018, with straddling periods treated as two notionally separate accounting periods for the purposes of calculating the available tax-credit. In Alphatax, we have included the changes required to extend the availability of the Summary of ECA qualifying assets input statements, and related tax-credit inputs, in the trade and nontrade section of the contents tree. The tax-credit rate change will be reflected automatically in the computation where an amount of loss is surrendered. 6

7 Double taxation relief Finance Act 2018 has introduced a restriction on the foreign tax paid that is eligible for double taxation credit or deduction relief. The legislation applies to companies with a foreign permanent establishment when losses of the PE have been relieved against income other than those of the PE in the foreign territory. In such a case, foreign tax paid is reduced by the relevant amount, which is defined by new s71b TIOPA 2010 as a sum of the amount of the decrease in the foreign tax chargeable on the other income plus any excess tax brought forward. Excess tax arises when the relevant amount exceeds the foreign tax paid in the period. We have added new sections to the Foreign tax & UFT and the Trade overseas income input statements to allow for the Decrease in foreign tax chargeable in period and any Excess tax brought forward to be entered. The appropriate relevant amount will be derived from these entries, and the double taxation relief calculation will be limited accordingly. A new Foreign tax paid reduction report statement with the relevant calculation will show when the Relevant amount section is completed. Corporate interest restriction Finance Act 2018 has made certain technical amendments to the corporate interest restriction rules introduced in Finance (No.2) Act These include: Ensuring certain hedgings against risk are included within the definition of relevant derivative contract debits and credits, Amendments to the public infrastructure company rules, including the date by which a qualifying infrastructure company election may be made, Changes to the definition of a worldwide group in respect of entities providing asset management services, Treatment of returns, with specifically company tax returns no longer automatically being treated as having been amended upon the submission of an interest restriction return, and details of penalties applicable where a company fails to submit an amended return. Most of these amendments relate to particular definitions or compliance areas and as such are outside the scope of Alphatax. Therefore, no changes have been made to the software in respect of these. Two amendments were of relevance however: The first, is a change to the definition of group-ebitda under s416 TIOPA The legislation now requires that any amounts relating to an R&D expenditure credit under s104a CTA 2009 are to be left out of account for the purposes of determining the group s profit before tax. The Group-interest and group-ebitda input statement in the Group module in Alphatax has been updated to include a note to this effect where an amount of RDEC has been claimed in the computation of one or more companies in the group. The second, relates to minor changes to the wording of amounts that fall within the definition of a relevant expense amount and relevant income amount under s411 TIOPA The appropriate narrative changes have been reflected on the Relevant amounts input statement in Alphatax. 7

8 Partnership reforms Finance Act 2018 has amended the definition of partners for income tax purposes to include indirect partners and beneficiaries of a bare trust where a partner is also the trustee of the bare trust. This does not have any impact on the Partnership module in Alphatax; any persons who meet the legislative definition of a partner should be entered using the existing repeating row on the Partner details input statement. Amendments by Finance Act 2018 also include changes to return requirements in that the tax reference of a partner is not required to be presented in the partnership return where: The person is not chargeable to income or corporation tax for the period the partnership return is made; The partnership does not carry on a trade or profession or a UK property business for the period the partnership return is made; During the period the partnership is required to set out information about the person in one or more relevant returns; and The partnership return includes a statement that the previous condition is met. Relevant return means a return under the International Tax Compliance Regulations 2015 (SI 2015/878). Where this situation is relevant, the Unique Taxpayer Reference field on the Partner details input statement may be omitted. A diagnostic will appear advising that this entry is required in accordance with HMRC e-filing validation rules, but this can be suppressed using the Suppress e-filing diagnostics and e-filing ready population of the form SA800? flag on the Submission options statement. Paper filing of the SA800 will be required. Bank levy reform The scope of the bank levy has been reformed by Finance Act Introduced in Finance Act 2011, the bank levy is an annual charge on the balance sheet equity and liabilities of banking groups that operate within the UK. The definition of equity and liabilities previously referred to the consolidated financial statements of the banking group, and so the worldwide equity and liabilities of the group were subject to the levy. The reforms in Finance Act 2018 amend this definition to now refer to UK-based equity and liabilities only, limiting the scope of the levy significantly. Certain overseas entities within the group are excluded, and any overseas permanent establishments of a UK bank may be disregarded. In addition, certain new classes of adjustments or reductions to the amount of equity and liabilities that are chargeable are now available. Finally, a threshold amount has been introduced which provides that where relevant equity and liabilities of a sub-group or entity do not exceed 50 million, that amount may be ignored for the purposes of the bank levy, subject to the total amount ignored by the group not exceeding 200 million. The application date for the changes is chargeable periods ending on or after 1 January The amendments affect the definition of chargeable equity and liabilities only; the calculation of the amount of the levy, and the rates used, are unchanged. For Alphatax, the reforms are largely outside the scope of the software, and instead affect the basis upon which the amounts entered into the Bank levy input statement in Alphatax should be drawn up. Accordingly, the overall structure of the Bank levy input statement is unchanged and will still accept details of the total equity and liabilities of the group before working through and Excluded amounts, Adjustments or Reductions to arrive at chargeable equity and liabilities. 8

9 We have made narrative changes in this edition to clarify that the amounts entered should now be the UK-based equity and liabilities, and we have introduced new rows in the Adjustments and Reductions sections to reflect the new adjustments and reductions afforded by the legislation. We have also taken the opportunity to introduce a Reference column on the input statement to provide guidance as to the legislative passage associated with each input, and we have added a new note to advise of the operation of the threshold amount. Venture capital trusts Legislation has been introduced in Finance Act 2018 which changes the requirements that must be satisfied to achieve venture capital trust (VCT) status under s274 ITA The changes increase the pressure on VCTs to invest their funds into growing companies, with the percentage used in the minimum qualifying holding condition increasing from 70% to 80%. This change has been reflected on the Trust declaration report within Alphatax, with the commencement date being periods ending on or after 6 April Finance Act 2018 has also added a new Minimum investment on further issue condition for which wording has been added to the Trust declaration report statement in Alphatax. The commencement date for this change is periods ending on or after 6 April

10 5. Finance (No. 2) Act 2017 Carried forward loss relief Deductions allowance Important note: This change potentially affects the loss restriction calculation applied by Alphatax for any accounting periods ending on or after 1 April Please read carefully. Following communications with HMRC, in this edition we have made an amendment to a part of the treatment of the deductions allowance within the loss restriction calculation applied by Alphatax. Specifically, this change relates to the allocation of the deductions allowance between Trading and Non-trading streams of profits, with the difference in opinion concerning an area of the new legislation where the strict wording which is what Alphatax applied in version 17.0 does not agree to the purpose of what Parliament appears to have intended. HMRC have confirmed to us that they are taking a purposive approach to this area and have advised that they would not accept a submitted computation prepared on the strict basis as accurate. In this edition, we have therefore amended this calculation without using an application date, and so any accounting periods ending after 1 April 2017 where the loss restriction calculation is relevant will potentially be affected. The change can affect the relevant maximum in each of the three restriction streams, and therefore the brought forward loss relief available and ultimately the corporation tax liability. We have included a full analysis of the specific legislative passages in point in the Appendix on page 33. In summary, the change relates to s269zb(7) and s269zc(5) CTA 2010 which require a company to specify the amount of their deductions allowance that is to be the trading profits deductions allowance and the non-trading profits deductions allowance. The legislation does not apply a restriction on this split and so for certain scenarios, and by following the strict wording of the legislation, you can allocate the deductions allowance to a stream which has low or no qualifying profits, to limit the effect of the deductions allowance being deducted, and so increase the relevant maximum in the other stream. HMRC have informed us that they would consider this to be incorrect, and that effectively they expect the deductions allowance to be allocated to streams of qualifying profits as far as possible where those profits exist. We have therefore amended our automatic deductions allowance allocation to include a new stage 4 which, as a final step, will perform an allocation adjustment where required. This allocation will look to determine if there is a stream where the allocation exceeds qualifying profits, and another stream where qualifying profits remain. Where this is the case, an amount of the deductions allowance will be reallocated to the stream with remaining qualifying profits. In addition to the changes required by HMRC guidance, we have also taken the opportunity to improve the efficient allocation that Alphatax performs (at our stage 2). This will produce a more accurate result and help to make the calculation being performed more understandable for users. Allocating the deductions allowance to a particular stream has the effect of increasing the relevant maximum in that stream. The premise of this stage is that for optimum relief, the relevant maximum should equal the lower of profits and losses, and so this calculation will work through the calculation backwards in order to determine if there is a stream which has capacity for the relevant maximum to be increased to this level. 10

11 The existing breakdown details statement explaining the allocation which is available from the Deductions allowance input statement has been fully updated to reflect these changes: The Help page for this dialog has updated with full details of the calculation being performed. For computations where these changes are relevant, the relevant maximum across the streams in the calculation will be changed, which can have an effect on the loss restriction calculation. This may accordingly affect the corporation tax liability of the computation, and the balance of carried forward losses. Where this is the case, an existing system in place in Alphatax will display a message upon first opening the computation to advise that a key calculation value has changed: 11

12 A record of what the relevant deductions allowance values have changed from and to will be included in the Audit trail report statement: An Override input for the allocation remains available on the Deductions allowance input statement, and this can be used to override the calculation performed by Alphatax. Existing computations where this input has been used will be unaffected by these changes. Non-trade financial losses alternative treatment The introduction of the carried forward loss relief rules requires that periods straddling 1 April 2017 are treated as two notionally separate accounting periods for the purposes of applying the new legislation, with profit and loss amounts being apportioned between those two periods. Published HMRC draft guidance on the commencement provisions generally provides that unused current period losses so far as they are deemed to relate to the first notional period carry forward into the next period of account as a pre-1 April 2017 loss or deficit. In the case of non-trade loan relationship deficits however, the offset of current period amounts against total profits falls within the legislation reforms (new s463b CTA 2009), and so HMRC allow for an alternative treatment to be applied. This treatment provides for unused current period deficits from the first notional period to be carried forward into the second notional period as a brought forward non-trade loan relationship deficit. These deficits may then be offset against non-trade income of that second notional period, subject to the s269zc restriction. For this edition, we have added a new Enable alternative treatment which carries forward deficits into second notional period? flag to the Non-trade financial losses input statement. Setting this flag to Yes will cause Alphatax to apply the alternative treatment whereby the amount of any unused deficits in the first notional period will be carried forward into the second notional period. This flag also affects the calculation of amounts of deficits available for group relief, and to be carried back. Terminal loss relief This edition of Alphatax includes support for relief for carried forward losses under the new terminal period provisions of s45f CTA This legislation was introduced as part of the carried forward loss relief reforms, and provides that where a trade ceases, and amounts brought forward into the terminal period under s45, 12

13 s45a or s45b remain unrelieved, those losses may be offset against relevant profits of the terminal period, or any period falling within the previous three years. Losses are relieved on an unrestricted basis (by virtue of s45f not being listed under s269zb(3) or s269zd(3)), and so this section has the effect that relief for brought forward losses is treated as unrestricted in the final years of trading. Relevant profits are defined as total profits in the case of losses that were brought forward under s45a, and trade profits in the case of losses brought forward under s45 or s45b. In Alphatax, we have now included a series with two fields provided in each case reflecting the differing treatment for pre-1 April 2017 losses compared to post-1 April 2017 losses of additional fields on the trade Losses input statement: Narrative Section Description Claim brought forward terminal loss relief? Current period loss relief Alphatax will initially offset any brought forward trade losses against profits of the same trade under s45 or total profits under s45a as appropriate, subject to the relevant restrictions. Set this flag to Yes to prompt Alphatax to offset any remaining losses brought forward against trade or total profits of the current period, ignoring the restriction, under the terminal loss provisions. Trade losses carried back under s45f CTA 2010 Losses carried back Where brought forward losses remain unused in the terminal period, they may be carried back. Enter Yes or an amount in this field to carry back an amount of brought forward losses under the terminal loss provisions. The legislation requires losses to be used in subsequent periods first, and so this input will only appear where the current period input is set to Yes. Terminal losses brought back under s45f CTA 2010 included in above Losses brought back Enter the amount of any losses brought back from a later accounting period under the terminal loss provisions. This field is used in conjunction with the existing Trade losses brought back field. 13

14 Miscellaneous changes In implementing the extensive and complex changes required for streaming of carried forward losses for version 17.0 of Alphatax, we inadvertently included a small number of calculation or display issues. We have addressed the following points in this edition: Trade Amounts of trade losses carried back under s37 CTA 2010 were not appearing in report mode correctly where the trade also had losses brought forward from a previous accounting period. This was caused by the interaction of a loss calculation that should have only been relevant for creative industry trades. This issue is now resolved, and the presentation of any affected computations will be corrected in this version. Where a loss-making trade included both one or more branches that made a profit, and R&D expenditure that was being surrendered for a tax credit, the calculation of the maximum losses available for surrender for a tax credit was incorrectly deducting the branch profits twice. Depending on the amount of losses surrendered, this could adversely affect the corporation tax liability for the period and the trade losses remaining to carry forward to future periods. This calculation issue has now been resolved. We have addressed an issue on the Double taxation relief report statement in periods straddling 1 April 2017 whereby the Rate returned for the trading profits row was wrong, incorrectly considering profits for the first notional accounting period only. This was a presentational issue only and did not affect the result of the double taxation relief calculation. Non-trade In periods straddling 1 April 2017, where there was a very low level of non-trade loan relationship credits in the period being fully offset by current period deficits, the Nontrade financial profits report statement was incorrectly hiding the amount column from view. The problem which was caused by streaming of profits causing a result that rounds to zero has now been addressed. Where amounts on the Overseas income input statement were received with foreign tax that was being taken as a deduction, the offset of non-trade loan relationship deficits brought forward against that income was incorrectly considering the gross amount of income, rather than the net amount after the foreign tax deduction, resulting in an excessive offset. This issue has now been corrected. Also, for computations with Overseas income and where foreign tax had been suffered, in periods straddling 1 April 2017 an amount of non-trade financial profits was incorrectly appearing on the Double taxation relief report statement. This was a presentational issue only, and the DTR calculation was unaffected. We have addressed an error arising in computations where the notional period apportionment override had been used on the Excess management expenses input statement to reallocate amounts between notional periods. This manual allocation was not being correctly reflected in the calculation of excess surrender amount for group relief which, in turn, could cause a surrender of non-trade intangible losses to appear incorrectly. Group relief Deductions in the Qualifying profits calculation must be net of any amounts surrendered as group relief. Alphatax uses hidden links in order to automatically perform this calculation correctly, however where group relief is entered but subsequently removed, residual values can in some cases be left in the relevant input. In the previous version, Alphatax produced a diagnostic where this was the case, but users were not able to access the relevant input in order to correct the computation. We have now provided a flag on the Qualifying profits input statement that will appear where this diagnostic is printed. This flag will cause a section to be displayed on the 14

15 input statement showing the links used by Alphatax, allowing users to remove the residual input and thereby correct the calculation. We have addressed an error that had been introduced in the allocation of group relief surrendered in respect of UK property business losses on the Loss allocation statement in the Group module. This error previously caused the allocation to be returned as double the correct amount, leading to the incorrect appearance of an overallocated amount, and the associated diagnostic ID 13. The allocation has now been corrected. The error was contained in the Group module only and there was no effect on the company computation. Banking companies The bank loss restriction operates alongside the carried forward loss restriction, and so for banking computations with pre-2015 banking losses brought forward, and more than one trade, the allocation of the amount of trade losses utilised must be performed in two separate stages: Firstly, the amount of pre-2015 banking losses is allocated up the level of the bank loss restriction. Secondly any remaining, non-banking losses are allocated up to the level of the carried forward loss restriction relevant maximum (provided this exceeds the amount of the bank restriction). For this edition, we have addressed two issues in our original implementation of this calculation: This first related to periods straddling 1 April 2017 whereby Alphatax was considering the banking restriction for the first notional period in the calculation of the allocation for the second notional period. This previously resulted in an unreconciled amount appearing on the Carried forward loss restriction input statement in some cases. The second relates to the calculation of the amount of trade losses remaining for the purposes of the secondary allocation, and now correctly considers the limiting factor that applied to the initial banking allocation (i.e. whether the allocation was limited to profits available, losses available, or the bank restriction, has an effect on how losses remaining for the purposes of the carried forward loss allocation should be derived). Corporate interest restriction In the previous version, the de minimis limit of 2 million that applies within the interest capacity calculation, was not being apportioned for a group period straddling the introduction of the restriction from 1 April Whilst the definition of the de minimis under s392 TIOPA 2010 refers to this amount as being 2 million for any group return period, the impact of the commencement provisions mean that the group period is notionally split upon the introduction of the rules, and accordingly the de minimis should be apportioned. We have resolved this issue, and Alphatax will now pro-rate the 2 million de minimis limit based on the number of days in the group period that fall after 1 April Please note: This correction has the effect of reducing the interest capacity in affected groups, which may result in an existing group computations now becoming subject to the interest restriction when they were not in the previous version of Alphatax. 15

16 During March 2018, HMRC updated their website with a series of Excel templates that may be used to prepare the Interest Restriction Return. Once completed, the relevant template must be saved as a PDF and manually uploaded to the HMRC submission portal: We have confirmed that use of these templates is optional, and that tax software may still be used to create the Interest Restriction Return instead. As such, our approach will continue to be that this return is created directly from within Alphatax as we believe this provides a more robust record of the completed submission. HMRC have said that where tax software is used to produce the return, they would prefer the format of the return to be as similar as possible to that of their templates. As such, in this edition we have made the following presentational changes to the Alphatax Interest Restriction Return report statements: Further standing data inputs have been added to the Interest restriction return input statement including: Revised return? for resubmissions, which is accompanied by a descriptive field for the way in which the resubmission differs to the return it supersedes Jurisdiction of incorporation of the ultimate parent Name by which group is to be known, which is taken from the existing field on the Standing data statement, with an override available if required The narrative against any elections made in the Interest Restriction Return has been simplified 16

17 Group identifying information including the name of the group and the ultimate parent - has been added to the top of the report pages following the main Interest restriction return report statement We have swapped the axes of the following report statements such that the company details will now be printed vertically down the page instead of in columns across the page: Statement of calculations Statement of allocated interest restrictions Statement of allocated interest reactivations We have corrected an issue which could arise where the translation rate used for a company computation differed to the group computation. The company amounts drawn up to group level on the Statement of calculations were previously not rounded to zero decimal places upon being translated, and in some cases this would result in an unreconciled amount diagnostic appearing that could not be cleared. 17

18 We have enabled the Company is a qualifying infrastructure company under s433 TIOPA 2010? flag on the Membership details input statement for group return periods ending before 1 April This election must normally be made by a company in the accounting period before the period in which it is to have effect, however a transitional rule allows this election to have effect immediately where it is made in a company accounting period beginning before 1 April A misinterpretation of this rule led us to incorrectly hide this flag for group return periods ending before this date in the previous version. The effect of being a qualifying infrastructure company is that adjusted corporation tax earnings and tax-interest income amounts are treated as zero for the company on the Statement of calculations statement in the Alphatax Group module. Certain tax-interest expenses amounts are also excluded, and an input is provided to this effect. The group accounts amounts on the Group-interest and group-ebitda statement should also be drawn up on the basis that the QIC company were not a member of the group. 18

19 6. Returns and forms PDF forms We have re-engineered the system that Alphatax uses behind-the-scenes to create printed versions of the tax return forms supported by the software. We now use the PDF forms provided by HMRC directly, rather than recreating substitute versions. The output produced by Alphatax when printing these forms is therefore much improved compared to previous versions. The form is now rendered as the original HMRC version, and the alignment and font re-sizing used to populate the boxes is more accurate: The menu options that users use to view or print the tax returns are unchanged from previous versions, being accessed via the File Print menu options. References to Facsimile Form in the menu options and Help system however have been updated to refer to Tax Return instead. The forms included in Alphatax for which these changes apply are: CT600 (2018) Version 3 Company Tax Return and all supplementary pages 19

20 SA700 (2018) Tax return for a non-resident company liable to Income Tax SA800 (2018) Partnership Tax Return and all supplementary pages Annual Tax on Enveloped Dwellings (ATED) Return Duplex printing Please note duplex printing is not supported for the new PDF forms within Alphatax. This will be delivered as a future enhancement. As a workaround, you may save the return as a PDF and then print double sided directly from Adobe Acrobat Reader. CT This edition of Alphatax includes the recently released form CT600 (2018) Version 3 Company Tax Return. This return is used for company accounting periods starting on or after 1 April 2015, and acts as a direct replacement for the existing 2017 version. The updates to the form relate entirely to the Northern Ireland rate of corporation tax, which was included in legislation via the Corporation Tax (Northern Ireland) Act 2015 but is yet to be enabled by Parliament. The new fields on the CT600 include: A new Northern Ireland information section on page 1 Box 325 for Northern Ireland profits included in the tax calculation Box 586 for NI Corporation Tax included in the tax liability A further Northern Ireland information section on page 10 returning summary details of Northern Ireland related group relief claims New boxes C46 and C161 on the CT600C relating to the amount of Trading losses Northern Ireland available for group relief surrender The new form CT600 (2018) is accompanied by a new e-filing schema which has also been included in this version of Alphatax. Important note: HMRC have included checks in their e-filing schema which will cause an e- filing failure if the Northern Ireland boxes are used. For this reason, in the current version, Alphatax will not populate the new Northern Ireland related boxes of the CT600 on either the PDF version of the form or in the electronic XML submission. We will include support for these new boxes in a future release once HMRC enable these fields in their schema. 20

21 Non-resident company Tax Return 2018 This edition of Alphatax includes the recently released form SA700 (2018) Tax return for a non-resident company liable to Income Tax. The only change from last year s edition is the removal of boxes 7.4 and 7.5 which related to business premises renovation allowances. This regime was withdrawn by SI 2012/868 with effect for expenditure incurred after 5 April The changes required to the Business premises and renovation allowance input statement in Alphatax to reflect this were included in the version 16.2 edition. For this edition, we have also removed two CT600 related diagnostics that were incorrectly appearing in a non-resident company computation when capital gains were involved. Partnership Tax Return 2018 This edition of Alphatax includes the recently released form SA800 (2018) Partnership Tax Return and all supplementary pages. The associated e-filing schema is also included. Details of the key changes on this year s form are summarised below. Residential finance costs not included Tax relief that landlords of residential properties may receive for finance costs under income tax rules is being restricted to the basic rate of income tax. The changes are being phased in between 2017 and This change to the legislation has been reflected on the form SA800 via the addition of a new box on the UK property and foreign property pages to accept the Residential finance costs not included. The amounts entered feed through to two new rows on the full version of the partnership statement to be allocated between the partners: Box 26-25% of residential finance costs on UK property Box 27-25% of residential finance costs on foreign property In Alphatax, we have included a new field on the trade level Partnership UK property income and Partnership overseas property income input statements to enter the amount of any residential finance costs not included. This entry should be used in conjunction with the existing Finance charges, including interest field in the Allowable expenses section. A new diagnostic will test that the not included entry is not excessive, in line with HMRC e-filing validation rules. The amount of finance charges not included will then be returned on two new rows on the Partnership statement input statement. These amendments are relevant for computations being drawn up under Income Tax rules only, and Alphatax will suppress the relevant inputs where the Partnership statement is drawn up using Income Tax rules? flag on the Return details input statement is not set to Yes. Traditional basis of accounting The property pages of the return (FHL, UK property, and foreign property) include a new box to state that income and expenses have been calculated using traditional accounting, rather than the cash basis. 21

22 The cash basis is a simpler system that may be used under income tax rules only, by small self-employed businesses where turnover does not exceed 150,000 per year. The SA800 already included box 3.9 on the trading pages to indicate that the cash basis has been used in drawing up trading income, but changes to the legislation introduced in Finance (No.2) Act 2017 have now extended this scheme to be available for property businesses as well. Please note: Compared to the trading pages, the sign of the flag is reversed on the property pages with the SA800 defaulting to assume that the cash basis is being used. This reflects the wording of the legislation whereby s31a ITTOIA 2005 states when the cash basis may be used for trading profits, whereas conversely the new s271a specifies when GAAP must be used for property businesses. In this edition of Alphatax we have included two new flags on the Return details input statement to specify that that the cash basis has been used in drawing up UK or overseas property business profits. These flags are only available where the computation is being drawn up under income tax rules, and the partnership does not include a partner who is a company (s271a(2)). In line with HMRC e-filing validation rules, a new diagnostic will test that the cash basis is not used where turnover exceeds the 150,000 limit. The use of the cash basis, and the application of this limit, applies across UK businesses (being UK property and UK FHLs) and separately across overseas (being overseas property and EEA FHLs). Miscellaneous changes The small partnership limit has been increased to 85,000 Boxes relating to Business Premises Renovation Allowance have been removed Minor narrative updates including website addresses referred to on the form 22

23 Annual tax on enveloped dwellings Paper form withdrawn HMRC have announced that they no longer accept paper versions of the Annual tax on enveloped dwellings form from 31 March The ATED online service must now be used instead to submit returns for all years from 1 April 2015 going forward. We have retained the associated statements and paper form output in Alphatax for the time being, and these will continue to use the latest version of the form for all future periods, but this functionality should now be used for memo purposes only. We have introduced a new note to this effect on the associated input statements. These statements may be enabled via the Other forms statement in the Administration section of the contents tree. Annual charge changes The amount of tax charged on properties within the annual tax on enveloped dwellings regime under Part 3 FA 2013 has seen inflationary increases for and : Property value Chargeable amounts for 1 April 2017 to 31 March 2018 More than 500,000 but not more than 1 million More than 1 million but not more than 2 million More than 2 million but not more than 5 million More than 5 million but not more than 10 million More than 10 million but not more than 20 million More than 20 million Chargeable amounts for 1 April 2018 to 31 March 2019 More than 500,000 but not more than 1 million More than 1 million but not more than 2 million More than 2 million but not more than 5 million More than 5 million but not more than 10 million More than 10 million but not more than 20 million More than 20 million Annual charge 3,500 7,050 23,550 54, , ,350 3,600 7,250 24,250 56, , ,950 These changes were applied by SI 2016/1244 and SI 2017/1246 respectively. This edition of Alphatax has been updated to include the latest amounts on the Annual tax on enveloped dwellings statement. 23

24 7. E-Filing We have removed the QualifyingDonations XBRL tag from the Allowed column total on the Qualifying charitable donations (management expenses) report statement. This tag remains in use on the CT600 return values report statement, and the presence of the same tag with in some cases a different value was previously leading to an inconsistent duplicate fact error when e-filing. We have updated the XBRL tags for special rate pool qualifying expenditure and disposal receipts to include all transfers in and/or out. These tags are now consistent with the treatment of comparable tags in the main pool. These changes apply for periods of account ending on or after 31 March We have addressed a display issue on the Loans to participators (CT600A) input statement whereby the Rounding difference field was not appearing when required for the second accounting period in a long period of account computation. This input might be needed where there is both a new loan being made in the period and also a loan repaid or released within 9 months of the period in which the loan was also made. The input is used to correct rounding differences that can arise in the summation boxes on the CT600A as a result of the 32.5% rate that was introduced in

25 8. Specialist companies Creative industries In previous versions, a long period of account computation with a creative industry trade marked as qualifying in one accounting period only would in certain circumstances fail e-filing due to an error in the dimension used for XBRL tags included in the computation. We have now addressed this issue by hiding the relevant accounting period columns on the <Creative industry> loss memorandum report statement for the non-qualifying period, which effectively excludes the incorrect tags from the submission. We have corrected an issue in the calculation of the amount of creative industry losses available for group relief where the Allowable total UK non-film production costs incurred in the period field is used. This issue had a knock-on impact on the amount of trading losses returned in boxes 780 and 785 of the CT600. The application date for this change is periods of account ending on or after 30 June Non-resident landlords We have added a new row to the Total property loss memo section of the Nonresident company property income input statement to return the amount of loss brought forward from the prior year to be offset against general income. As a brought forward value, this field will serve as an input in the first period of a computation, now ensuring that this form of relief may be correctly set up in such situations. We have reviewed and added missing footnotes that had been entered for fields on the Additional information input statement but were not displaying on the Income tax and capital gain tax report statement. Partnerships In previous editions, certain rows on the Partnership statement would allow a loss to be allocated to one or more partners even where the partnership made a profit overall, and vice-versa. This position is prohibited by the legislation under ss CTA 2009 in the case of corporation tax rules, and ss850a-850b ITTOIA 2005 for income tax rules. The rows concerned are: Profit (or loss) on UK property Loan relationship credits/(debits) Non-trade intangible credits/(debits) We have now added diagnostics that will advise of invalid allocation on these rows. The application date for these diagnostics is computations using the version of the form SA800 onwards, being periods ending on or after 6 April

26 Northern Ireland rate of corporation tax Legislation was introduced during 2015 that will enable the Northern Ireland Executive to set a Northern Ireland rate of corporation tax for companies trading within the region. Authority to set the rate is yet to be provided by Government however. Previous indications were that this authority was due to be provided from 1 April 2018, and the Northern Ireland rate of corporation tax calculations in Alphatax previously applied from this date. The Autumn Budget 2017 included a statement from the Government that reiterated their commitment to introducing this regime but indicated that a further announcement would not be forthcoming until some point during Accordingly, we have postponed the availability of the Northern Ireland rate of corporation tax calculations in Alphatax by one year, to the provisional date of periods of account ending on or after 1 April Life assurance companies We have now included support for pre-1 April 2017 and post-1 April 2017 streaming of long-term business fixed capital property business losses as required by the carried forward loss relief reforms included in Finance (No.2) Act Following user feedback, we have provided an alternative way of calculating the maximum offset of non-blagab capital losses against BLAGAB capital gains. The treatment is available via a new flag on the Claims chargeable gains and losses input statement. 26

27 9. Miscellaneous changes Pensions The pension spreading calculations in Alphatax rely on contributions entered in previous periods in order to determine the correct position for the current period. It is important therefore that contributions entered in earlier periods are not modified in later periods. Alphatax locks the relevant inputs to avoid problems being introduced with these calculations. For the version 16.2 edition of Alphatax as part of an enhancement change for a translation mode issue we amended the pension calculations to refer to the amount of the contribution as originally entered in the first period of the file for which the row existed. In cases where the locking referred to above had been circumvented, and this original contribution amount had been changed on the input statement in a later period, an issue was created whereby the amount of the contribution presented on the input statement was not the amount that Alphatax was using for the purposes of the spreading calculations. This would cause the spreading calculations to be performed incorrectly, and due to the locking applied users had no way of correcting the computation themselves. In response to this, for this edition we have included a new flag on the Configuration options input statement that will allow the period dates of the contribution to be unlocked in the accessory statement of the pensions input statement. The accessory statement will present the amount of the contribution as originally entered, and this configuration option should be used to change the period dates back to the correct, original position for the contribution. Any intervening contributions that are missing may then be entered as new rows, where required, correcting the pensions spreading calculations. We have included an example of this process in the Appendix on page 37. Diagnostics For divisional computations, Alphatax conjoins the name of the division with the name of the parent computation to form the main Company name used in the field on the Standing data input statement. Where the two names combined are of sufficient length, this would previously cause an e-filing diagnostic to appear stating that the company name may not exceed 56 characters. This diagnostic is only relevant for computations that will be e-filed, and so we have now suppressed this in divisional computations. Patent box We have addressed a presentational issue on the Patent box - routine return figure report statement whereby the Head 4 - Plant and machinery costs row was displayed twice in periods straddling 1 July 2016, and where an amount had been entered for the second notional accounting period. 27

28 Tax categoriser When a company had chosen to use the Enter NBV for Finance lease receivables? configuration option, the tax categoriser function was not available from the Finance lease receivables analysis input statement in certain scenarios. We have now corrected the column display rules within this statement, which corrects the availability of the tax categoriser. We have addressed a presentational issue that was inadvertently introduced as part of the grassroots sports amendments included in version 17.0 of Alphatax. Where certain tax categorisation items were created to the Qualifying charitable donations input statement, a blank column heading was being produced on the analysis statement. This issue has now been resolved. Capital allowances SI 2017/1304 extended the qualifying expenditure window for claiming zero-emissions goods vehicles under s45da CAA 2001 from 8 years to 11 years. Alphatax has been updated to display the relevant inputs so that companies are able to claim relief until 1 April We have addressed an issue with the Postponement for this period [may enter amount] field on the Ships capital allowance input statement that previously stopped users from being able to postpone an amount of WDAs or FYAs in certain circumstances depending on the level of brought forward and current period postponed amounts. Group relief We have re-instated the option to choose to Suppress entries for details of company surrendering relief on CT600C? on the Group information input statement. This option may be used where completion of the Details of company surrendering relief fields on Part 2 and Part 4 of the CT600C would be superfluous to the group relief schedule provided by an authorised company in a simplified arrangement group to HMRC. The flag had been removed for being itself superfluous upon updating for Version 3 of the CT600 in 2015 but, following user feedback, we have now re-introduced it. Restitution interest This version of Alphatax includes a new field to identify the amount of any restitution income that has been included in the Profit and loss account. This allows for more accurate presentation of the amount on the trade Accounts adjustments and Profit and loss account reconciliation report statements, and in tax accounting. Tax categoriser and secondary adjustment functions for this new field have been added accordingly. 28

29 10. Optional Modules Tax Accounting We have enabled the ability to change the Date and Cost input fields in the accessory statement for expense items on the Revalued capital assets input statement. These fields directly affect the opening and closing deferred tax provision for the company, and so brought forward rows are intentionally locked on the main input statement in order to avoid unintended changes to these key balances between periods. Amendments in these fields in the period in which they are created are not carried forward to pre-existing later periods however. In previous editions therefore, where a change was made to expense items on this statement, these changes would not carry forward to the following period, and there was no way for the user to correct this. The accessory statement may now be used to align later periods where a change was made to an earlier period. The latest inputs are transferred when new periods are created. 29

30 11. New CCM Dashboard This edition of Alphatax includes the new Compliance Cycle Manager Dashboard (CCM Dashboard) - an enhanced version of the traditional CCM delivered in an embedded web browser within Alphatax Enterprise. Whilst retaining the full features associated with its predecessor, CCM Dashboard delivers more control by improving visibility over tasks and processes, aids workload prioritisation and gives you direct access to underlying information through the interactive charts. Key process information, that is synchronised with Alphatax, is displayed in a clean graphical interface, giving tax compliance teams and senior management real-time visibility, insight and control over tax processes. You may switch between the traditional CCM and the CCM Dashboard using the Window menu within Alphatax: Please note: If CCM Dashboard is not enabled in your organisation, a static web page will be displayed highlighting the features and benefits of the new Dashboard. 30

31 Enabling the CCM Dashboard The CCM Dashboard requires the installation of additional components to support the embedded web browser within the Alphatax Enterprise database. There is a separate CCM Dashboard Installation Guide and installation wizard available from our Download site: to help the team responsible for upgrading Alphatax, to install the necessary components. Interactive charts The CCM Dashboard features a modern dashboard layout with customisable panels which support a core library of four interactive charts to show: E-filing performance by month; Processes running on time, categorised by completed/past warning/past urgent; My recent activity; and Computations, total by year. These panels are clickable and support drill down to the underlying Alphatax companies. The library of information that can be displayed in these panels will expand over future releases. The core library is delivered within Alphatax Enterprise at no additional cost. Setting your default CCM The default version of CCM that is launched within Alphatax is set by system administrator through the Enterprise database registry settings. The Enterprise Manager Administrator Guide contains details about the registry settings for CCM and CCM Dashboard. 31

32 12. System changes Alphatax Enterprise changes Protected User In response to customer feedback, a new Alphatax Enterprise user permission-type has been created. The new Protected User is able to see the directory (node) containing the Alphatax computations, can open and make edits to the computations, but cannot save them back to the database. This supports the situation where the team responsible for preparing the computations want to give someone else restricted permissions to view and manage, but not permanently amend, them. The details on how Protected Users are attributed to nodes can be found within the Protected Node Management section in the Enterprise Manager Administration Guide. You will also find details of the new Enterprise database user-type, Enhanced User, within this guide. An Enhanced User can assign users to specific nodes as a Protected User. User Manager Table sort order We have corrected an issue whereby the User Manager Table in Enterprise Manager was no longer listing users in alphabetical order. This only occurred when the user accessing Enterprise manager was assigned to the top node. Miscellaneous system changes We have corrected an issue that was causing a crash during assembly of the tax computation for e-filing when the tcslbase.ini file setting PrintFooter=0 was included. We have corrected an issue whereby the server function was not setting the Sender address when using SMTP and therefore not generating automatic s. s sent using MAPI were not affected. We have corrected an issue in which archived periods in Alphatax professional files were being prevented from being restored. 32

33 Appendix A - Deductions allowance allocation Legislative background The loss restriction legislation under Part 7ZA CTA 2010 limits relief for carried forward losses to a relevant maximum. This restriction is applied at three separate stages: S269ZB Pre-1 April 2017 trading losses S269ZC Pre-1 April 2017 non-trading deficits S269ZD Deductions from total profits The relevant maximum is defined separately for each of these sections, but broadly is equal to 50% of the relevant profits plus the deductions allowance for each stream: Companies are entitled to an amount of deductions allowance (which may be nil) in accordance with ss269zr-269zzb. For the purposes of s269zb and s269zc, the deductions allowance that a company has available to it must be split between the trading profits deductions allowance and the non-trading profits deductions allowance. The legislation at s269zb(7) states that the company s trading profits deductions allowance is so much of the company's deductions allowance for the period as is specified in the company's tax return as its trading profits deductions allowance for the period and accordingly nil where no such amount is specified: The same definition is used for the non-trading profits deductions allowance at s269zc(5). The legislation does not apply any kind of rule on this split; this is simply the amount that the company states as the trading profits deductions allowance and non-trading profits deductions allowance in their return. Following the legislation through, relevant trading profits and relevant non-trading profits are then defined under s269zf. The legislation is worded such that qualifying profits for the company are first drawn up, and these are split into qualifying trading profits and qualifying non-trading profits (s269zf(3)). Relevant trading profits are then qualifying trading profits less the company s trading profits deductions allowance, but limited to nil where the trading profits deductions allowance exceeds qualifying trading profits. Relevant non-trading profits are drawn up in the same way: 33

34 Importantly, there is nothing here that limits the trading profits deductions allowance to the level of qualifying profits. Rather it is relevant trading profits which are limited to zero where the trading profits deductions allowance exceeds qualifying trading profits. The same is true for the non-trade stream. It is this step that can potentially be used to create the result that HMRC have disputed. The amounts derived to this point then form the basis of the relevant maximum used in the trading and non-trading restrictions at s269zb and s269zc respectively. The definition of relevant profits for the purposes of the s269zd restriction however also relies on these same relevant trading profit and relevant non-trading profit amounts, summing the two together: 34

35 The relevant maximum is then defined as 50% of this amount, which again flowed from the separate trading and non-trading streams, plus the company s deductions allowance, and the legislation is referring to the original amount available to the company here. The legislation is structured such that even where there are no pre-1 April 2017 losses present, and so s269zb and s269zc are not relevant, the trading and non-trading relevant profit streams are still calculated before being brought together for the purposes of the total profits restriction under s269zd. Accordingly, the split of the deductions allowance between the trading and non-trading streams, and the limit to qualifying profits that applies on the deduction of the deductions allowance in those streams, has a direct effect on the relevant maximum in all three stages of the restriction. Example A company has a December year end with: - 10m trading profits - 10m management expenses brought forward - 5m deductions allowance Due to the nature of the income, qualifying trading profits are 10m and qualifying non-trading profits are nil. Strict view Following the strict wording of the legislation, the company is entitled to specify that their deductions allowance is to be split as follows: Trading profits deductions allowance = nil Non-trading profits deductions allowance = 5m Relevant trading profits and relevant non-trading profits are then given under the legislation as qualifying profits less the deductions allowance in each stream, with the result limited to zero: Relevant trading profits = 10m nil = 10m Relevant non-trading profits = nil 5m = nil when limited to nil Relevant profits for the purposes s269zd are relevant trading profits plus relevant non-trading profits which equals 10m. The relevant maximum is then 50% of this amount plus the company s deductions allowance: Relevant maximum = 10m 50% + 5m = 10m Relief for the management expenses brought forward would therefore be available in full. HMRC s view HMRC s purposive view is that the intention of Parliament is that relief should be given freely up to the level of the deductions allowance, and then restricted to 50% of profits from there. The relevant maximum should therefore be calculated as profits less the deductions allowance, at 50%, plus the deductions allowance: Relevant maximum = ( 10m 5m) 50% + 5m = 7.5m 35

36 HMRC consider therefore that relief for the management expenses should be restricted. The legislation does require that the deductions allowance is split between trading and nontrading streams for the purposes of this calculation, and therefore the inference is essentially that when apportioning this amount, HMRC expect the allowance to be allocated to streams with qualifying profits as far as possible where those profits exist. 36

37 Appendix B - Pensions contributions The problem 2015 a pension item statement is created in this period of the file, and the contribution for the period of 500k is entered: 2016 The file is rolled forward, and the 2015 contribution row is brought forward by Alphatax as read only. However, locking did not apply in the accessory statement for this period (locking was brought in for periods of account ending on or after 30 June 2017), and so the user knowing that spreading is not relevant in this case uses the inputs in the accessory statement to recycle the 2015 row to form the 2016 contribution of 1m: 2017 When the file is rolled forward and the 2017 contribution of 1.5m is created, Alphatax determines that spreading is applicable even though the contribution does not exceed 210% of the prior period contribution: 37

38 The reason is that Alphatax is considering the contribution as originally entered for the 2016 contribution row, which was 500k. The solution The solution is to correct the chronology of the contributions which can be done by setting the Unlock pension contribution inputs for prior periods in accessory statements? flag to Yes on the Configuration options input statement. The date and Paid in period inputs for the contribution will then be unlocked in the accessory statement of the pensions input statement. The 2016 row can then be changed back to contain the details for the original 2015 contribution. The 2016 row can then be created as a new row, correcting the spreading calculation. 38

39 Tax Computer Systems Limited Magna House, London Road, Staines-Upon-Thames, TW18 4BP T: E: W: Copyright 2018 Tax Computer Systems Limited Registered Office: Magna House, London Road, Staines-Upon-Thames, TW18 4BP Registered in England & Wales number