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Contents
1. Introduction ... 4 About version 20.1 ... 4 Technical support ... 4 2. Important notices ... 5Tax return forms ... 5
Finance Act 2020 ... 5
VPN performance issues ... 6
3. Installation ... 7
Installation key ... 7
Downloading and installing Alphatax ... 7
Templates ... 7
Alphatax platform support ... 8
4. Finance Act 2020 ... 9
Corporate capital loss restriction ... 9
5. Returns and e-filing ... 13
Company tax return CT600 (2021) ... 13
Research and development CT600L (2021) ... 16
Non-resident company tax return SA700 (2021) ... 19
Partnership tax return SA800 (2021) ... 20
6. Specialist companies ... 21
Non-resident companies ... 21
Creative industries ... 21
Banking companies ... 22
Partnerships ... 22
Life assurance companies ... 22
7. Miscellaneous changes ... 24
IFRS 16 ... 24
Corporate interest restriction ... 29
Intangibles ... 32
Capital disposals ... 32
Group relief ... 33
Real estate investment trusts ... 33
Capital allowances ... 33
Fixed assets ... 33
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Long funding leases ... 34
Patent box in periods straddling 1 July 2021 ... 35
Other miscellaneous changes ... 36
8. Optional modules ... 37 Accounts Analysis ... 37 Tax Accounting ... 37 Group ... 39 Report designer ... 40 9. Templates ... 40
Capital allowance updates ... 40
Carry forward correction ... 41
Templates removed ... 42
Miscellaneous template changes ... 42
10. Platform enhancements and bug fixes ... 43
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1. Introduction
About version 20.1
Welcome to the version 20.1 edition of Alphatax UK. This release includes the following features:
Finance Act 2020 further changes
Updates for the latest versions of forms CT600, SA700 and SA800 Analysis of IFRS 16 amounts for the corporate interest restriction A new Investment expenditure summary ancillary statement
Tax accounting improvements including a consolidation system for custom rows in the reconciliation in the Group module
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 you require help or further information, please contact the support team on:
UK: Tel: +44(0) 1784 777 666 Email: [email protected]
Ireland: Tel: +353 (0) 1661 9976 Email: [email protected]
Please note: We recommend that you use the E-mail Support option from the Help menu in
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2. Important notices
Tax return forms
This edition includes the 2021 versions of the tax return forms CT600, SA700 and SA800. These forms are presently in draft format and we will be reviewing the final versions once published by HMRC – which we expect to be in early April – to ensure that no changes are required.
We are releasing these forms early because of the introduction of the CT600L supplementary page for Research and development which HMRC have indicated must be used for any new or amended submissions from 1 April 2021 onwards, with their live e-filing service being updated to accept the new form CT600L for submissions on 6 April 2021.
The 2021 version of the CT600 acts as a direct replacement for the 2020 version, and so is applicable for accounting periods beginning on or after 1 April 2015. However, HMRC are yet to update their e-filing systems, and so this form cannot yet be used.
Alphatax will continue to use the 2020 version of the CT600 until 1 April 2021 at which point it will transition to use the 2021 version, including the CT600L where relevant.
Note that the delay in HMRC updating their live e-filing service means that users should not attempt to submit a tax return including a claim for R&D tax credits between 1 and 5 April 2021 inclusive as this will fail HMRC’s e-filing service.
Please see page for 13 further details.
Finance Act 2020
The legislative timetable ahead of the 2020-21 tax year had been running behind schedule as a result of the December 2019 General Election, held around the same time as the Budget would have taken place.
The Budget was accordingly postponed to early Spring with Finance Bill 2019-20 being
published on 18 March 2020. Progress of this Bill through Parliament was then affected by the Covid-19 crisis, but Royal Asset was granted on 22 July 2020.
In order to provide customers with timely access to the latest legislation, the previous version of Alphatax was issued before Royal Assent, with the included ‘Finance Act’ changes being based upon draft legislation which was yet to be finalised.
We have now fully reviewed the final version of the legislation against the Bill. There are no changes to the wording of the relevant corporation tax passages and so our initial
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VPN performance issues
We have become aware of a small portion of our userbase who are experiencing issues with Alphatax performance when undertaking file intensive actions such as e-filing assembly when accessing computation files over a VPN connection.
We are reviewing Alphatax to determine whether we can improve baseline performance during these actions, through targeted code changes in a forthcoming release. However, based on experiences across our userbase we believe that, where your file server is cloud-based, the VPN configuration is the major determinant of adverse performance in these cases.
To ensure that your VPN connection is optimized to work with Alphatax we suggest that you contact your IT team.
In the meantime, if you experience this issue then performance may be improved by
completing your e-filing assembly/submission out of core working hours, when internal traffic across your VPN or fileservers will be reduced. You can also contact the Alphatax support team to discuss other possible workarounds.
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3. Installation
Installation key
Your 16-digit Alphatax installation key is provided in the email 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 01784 777666 or at [email protected].
Downloading and installing Alphatax
Please download the copy of Alphatax from the releases download site: https://releases.taxsystems.com/
You will be required to enter your email address and your 16-digit Alphatax installation key. This process will generate an automated email with a unique URL which will be sent to your email address.
The URL will allow you to download the Alphatax installer along with other applications which you are registered to use and also installation guides and release notes.
Click on ‘Alphatax v20.1.1.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. This can be retrieved from the user documentation section of the download screen.
Enterprise users, using the Oracle or MSSQL databases, should also run the database update script from within the Enterprise Manager utility. The database version is now 42. 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 are stored in 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.
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Alphatax platform support
Operating Systems
Alphatax is supported on Windows 7 and later operating systems for the desktop. Alphatax is also supported on Windows Server 2012 and later on servers.
Oracle
Oracle Database versions from 19c onward are supported by Alphatax 20.1.
Extended support for Oracle 11g was withdrawn by Oracle last year, and consequently this Oracle version is no longer be supported by Alphatax. We recommend using the latest Oracle version 19c.
End of Life
To view our End-of-Life policy, please go to this link:
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4. Finance Act 2020
Corporate capital loss restriction
Pre-entry losses
Under existing provisions, pre-entry losses – of both the current period and brought forward – are offset against chargeable gains under TCGA 1992 Sch 7A paragraph 6(1), subject to the limitations on which disposals these losses may be set off against at paragraph 7.
Net chargeable gains after relief for pre-entry losses then feed into TCGA 1992 s2A(1) to be relieved by any other losses, both current period and brought forward. Importantly therefore, brought forward pre-entry losses are offset in legislative terms before general losses of the current period.
As a consequence, in order for the corporate capital loss restriction to function correctly, whilst not unduly restricting the use of pre-entry losses which are already limited by paragraph 7, Finance Act 2020 introduced specific additional rules into paragraph 6.
These rules apply where chargeable gains arising exceed the sum of pre-entry and general losses of the current period, i.e., where there is capacity to utilise brought forward losses. The amount of pre-entry losses brought forward that may be offset is limited to the total of:
• the amount of pre-entry losses brought forward that could be relieved on the assumption that these were treated under s2A(1)(b), i.e., subject to the loss restriction, and
• the amount of general losses that could then be offset under s2A(1) following the same assumption.
Relief for general losses is then limited to the amount given above less the amount of pre-entry losses brought forward that are offset.
The effect of these rules is broadly that the application of the corporate capital loss restriction calculation is shifted to the current period general losses; overall relief will be unchanged but pre-entry losses brought forward are used up first at the expense of creating general losses carried forward.
For this edition we have now updated Alphatax to consider the effect of these legislative rules. Due to the ordered nature of our tax rules, we are not able to perform this calculation in the same way as it is done in the legislation, using the ‘fiction’ that pre-entry losses were offset under s2A(1).
Alphatax will therefore offset general losses of the current period first, before pre-entry losses brought forward on a restricted basis.
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An adjustment is then calculated to reflect the legislative treatment for pre-entry losses brought forward to effectively be used in place of current period losses, and a note will be printed on the Capital losses report statement to clarify that this treatment has been applied:
These changes apply for all computations affected by the corporate capital loss restriction, which itself was introduced for accounting periods beginning on or after 1 April 2020. Please note: As part of the commencement provisions of FA 2020 Sch 4, paragraph 44(3)
provides that in respect of TCGA 1992 s2A(1)(a), losses of the pre-commencement period may be offset against gains in the post-commencement period, and vice versa.
Alphatax assumes that this treatment should apply to pre-entry losses notwithstanding the fact that these are relieved against pre-entry gains under paragraph 6(1). For this edition we have introduced a Disable pre-entry loss relief across commencement under para 44(3) Sch 4 FA 2020? flag to the Capital losses input statement should users wish to disapply this interpretive assumption.
Companies without a source of chargeable income
Non-resident companies who are within the charge to corporation tax as a result of a capital disposal only will have a short accounting period, typically for one day, being the day of the disposal.
Finance Act 2020 introduced specific rules designed to ensure that these short periods are not subject to unintended tax treatment; the very large quarterly instalment payment provisions of SI 1998/3175 regulation 3 are disapplied, and a claim is available under CTA 2010 s269ZYA to access the full amount of the deductions allowance.
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In this edition we have introduced the following changes to this area, building upon functionality included in the previous release:
• HMRC draft guidance on the Corporate capital loss restriction – presently included as an appendix to the Capital Gains Manual – refers to “one-day (or other short) accounting periods”. The reference to other short periods is not explained, but our understanding is that this will apply in situations where, for example, a non-resident company makes two disposals on consecutive days (note that the legislation does not refer to the length of the accounting period).
By default, Alphatax will continue to test for the length of the accounting period being one day in considering whether to automatically apply these legislative changes, however we have now also added a Company has no source of chargeable income under s269ZYA(5)? flag to the Deductions allowance input statement that can be used to manually apply the same treatment for longer accounting periods.
• Companies without a source of chargeable income are entitled to make a claim to access the full amount of the deductions allowance over the course of a financial year. The legislation defines two types of periods: a Claim AP being one in which a s269ZYA claim is made in which case the deductions allowance is the lower of:
o the amount of the deductions allowance not already used, o capital losses brought forward, and
o chargeable gains arising;
and an Alternative AP being one in which a claim is not made, in which case the deductions allowance that would be available is reduced by the amount already used in Claim APs.
In this edition we have now added a Deductions allowance memo section to the Deductions allowance input statement which will track the amount of the allowance used during the financial year, identify the type of accounting period, and apply the
appropriate limit to the deductions allowance available in the period. An override is also provided where claims are not made in date order.
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• Capital losses arising within a one-day (or other short) accounting period may be offset against gains arising in other one-day (or other short) accounting periods within the same financial year. This is by virtue of the newly introduced sub-sections (3) and (4) in TCGA 1992 s2A. Losses carried forward or back in this way are treated as losses of the current period and do not form part of the corporate capital loss restriction.
We have added new inputs to the Capital losses input statement to allow amounts to be entered as utilised in the current or other period within the same financial year.
Insolvent companies
CTA 2010 s269ZWA provides that the deductions allowance for the winding up period of a company in insolvent liquidation is increased by the lower of chargeable gains arising and capital losses brought forward.
For companies marked as being in liquidation on the Standing data input statement, a new Winding up accounting period of a company in insolvent liquidation under s269ZWA? flag has been included on the Deductions allowance input statement to prompt Alphatax to apply this treatment.
The amount of the deductions allowance before any increase must be stated in the tax return under s269ZZ(1)(aa) and Alphatax will present the relevant details on the Deductions
allowance report statement.
Chargeable gains for these purposes are also calculated with certain modifications as set out in s269ZWA(3) and so an override input for the increase is also provided if necessary.
Corporate capital loss restriction miscellaneous changes
• The V20.0 edition of Alphatax was released before Finance Act 2020 had received Royal Assent and so, as a failsafe, we include a control in the table file that will allow the CCLR changes to be switched off if we need to.
For installations where an older version of the table file was used with V20.0 however, this control created calculation issues for capital disposals in older periods. To ensure that these issues are resolved, we have now removed this table file control entirely. This will have no effect on users using the most up to date table file.
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5. Returns and e-filing
Company tax return CT600 (2021)
HMRC have issued a new version of form CT600 for 2021 which has been included in this edition of Alphatax. This form acts as a direct replacement for the preceding CT600 (2020) and is used for accounting periods starting on or after 1 April 2015. The new boxes added are described below.
The form is presently in draft format, and we will be reviewing the final version as soon as it is published to determine whether any changes are required.
Please note: HMRC are not due to update their e-filing service to include the new form until 6
April 2021. The CT600L however is required for any new or amended submissions from 1 April 2021. Alphatax will continue to use the 2020 version of the CT600 until 1 April 2021, at which point it will transition to using the 2021 version, including the CT600L where relevant. Where the CT600L is required, users will not be able to e-file in the period between 1 and 5 April 2021.
Coronavirus Job Retention Scheme (CJRS)
Page 5 of the form includes a new Coronavirus support schemes and overpayments section. Boxes are provided for the amount of CJRS and JSS received compared to the amount of the CJRS and JSS entitlement.
Where the amount received exceeds the amount that was due, an overpayment will be relevant, although this may be reduced by any CJRS and JSS overpayment already assessed or voluntarily disclosed. Any amount of JRB and EOTHO overpayments are also added in.
The net result of these four boxes (471 plus 474 minus 472 and 473) is included in the
Calculation of tax outstanding or overpaid section of the form at the new box 526, in a
similar way to restitution tax, and increases Self-assessment of tax payable in box 528. The updated tax return guide confirms that this amount is charged to income tax and will be collected through a separate assessment. It should not be paid as part of any main corporation tax liability.
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Inputs for these amounts have been made available in the Repayment details statement in Alphatax, which appears nested under the Return details statement in the Administration section of the contents tree.
Please note: The update guide confirms that this is not an amount of corporation tax and
should not be paid alongside any liability. Instead, a separate assessment to income tax will be made by HMRC.
Eat Out to Help Out Scheme
A new box 647 has been added to the Indicators and information section of the form for the amount of Eat Out to Help Out Scheme: reimbursed discounts included as taxable income. The updated tax return guide confirms that such amounts should have been included in taxable turnover.
The corresponding field for this box has been included on the Return details input statement.
Zero emissions cars
New boxes have been added to the trade and non-trade parts of the Information about
capital allowances and balancing charges section of the form for allowances in respect of
Zero emissions cars.
This reflects the Government’s announcement in the March Budget that the window for the existing CAA 2001 s45D – which provides a 100% first year allowance for expenditure on cars with low carbon dioxide emissions – would be extended from 31 March 2021 through to 31 March 2025, but with the existing qualifying limit on emissions of 50 grams per kilometre reduced to zero grams per kilometre. We are yet to see the legislation that will enact these announced changes.
Allowances under this section of the legislation would previously have been claimed using the general Expenditure on which FYAs at 100% are claimed (other) field on the trade and non-trade Plant and machinery main pool input statements within the Capital allowances sections of the contents tree.
In order to derive the correct treatment for the CT600 however, we have now introduced new zero-emission cars versions of these boxes.
The announcement also confirmed that the window for FYA qualifying expenditure on zero emissions goods vehicles under s45DA would similarly be extended from 31 March 2021 through to 31 March 2025.
This category of allowances already had specific boxes on the form CT600. We made the relevant change for the dates in the V20.0 edition of Alphatax.
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First year allowances disposals
HMRC have further updated the Information about capital allowances and balancing
charges section of the form by grouping the first-year allowance-specific boxes together,
which has been done so that the ‘Balancing charges’ heading can be replaced with ‘Disposal value’ for these items:
HMRC have confirmed that these boxes should be populated with the disposal value on any first-year allowances assets that have been sold, rather than any resulting balancing charge that would have arisen upon disposal from the pool.
We have accordingly updated the Plant and machinery main pool and Special rate pool input statements with new inputs that allow the relevant disposal amounts for first year allowance categories to be entered where a disposal exists in the pool.
The existing inputs – which were used to record a balancing charge in the first-year allowance categories – have been removed unless already populated.
XBRL tagging
• We have enhanced the trade Adjustment analysis, Income adjustments, Expense
adjustments, and Management expenses statements by offering users an additional layer of XBRL tagging for adjustments. This new feature allows users to select a classification from a drop-down list on the face of the statement for the row, rather than via the accessory statement which removes the need for double entry.
The accessory statement approach and the new drop down input will work together such that accessory inputs take priority over the drop down classification. The existing
Automatically attribute any unreconciled XBRL streamed adjustments to 'Other'? configuration option is also still available and will apply last.
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• Where the Detailed profit and loss account input statement is in use in the computation, we have now added diagnostics and X indicators to advise users where a category of dimension is being used that does not appear in the taxonomy. These categories carry forward between periods and so this would generally occur where a previous dimension is changed in a newer version of the taxonomy. Where a category that is not present in the taxonomy being used, this will cause an e-filing failure.
Alphatax allows the user to control the dimensions being used both in terms of the defaults on the face of the Detailed Profit and Loss account statement, and also where more detailed analysis is being performed on the Detailed profit and loss account analysis statement.
• We have corrected the period type of PatentBoxAdjustmentRelevantIPLossesRIPL BroughtForward tag from duration to instant. The equivalent of the tag for post-1 July 2016 patents, PatentBoxAdjustment2016RelevantIPLossesRIPLBroughtForward, remains unchanged with the period type being set to duration as in line with the taxonomy
Research and development CT600L (2021)
Introduction
This version includes the newly introduced form CT600L. This supplementary page supports any claim for research and development tax credits and proves the amounts that feed into boxes 530 and 880 on the main company tax return.
The CT600L is primarily aimed at the large company RDEC scheme and presents an extended series of boxes beginning with qualifying expenditure and working through the details of each of the 7 steps of relief outlined under CTA 2009 s104N, also reconciling any amounts carried forward or surrendered to group companies. For SMEs, surrenders of losses in return for a tax credit under the R&D scheme of CTA 2009 Part 13 are also included on this form.
For users of Alphatax in the majority of cases the treatment of research and development in the tax computation is unchanged and the CT600L will be automatically completed based on existing entries.
In certain scenarios new inputs may be required to provide additional detail for the return, or the Alphatax calculation has been amended to align with the treatment on the return. Further details are provided below.
Application date
HMRC have advised that the form CT600L must be used to support R&D claims for all new and amended tax returns from 1 April 2021. Alphatax will accordingly automatically enable this form as part of the update to the CT600 (2021) for submissions assembled from 1 April 2021. HMRC however are only updating their e-filing service on 6 April 2021 and so users will not be able to submit a tax return that requires the CT600L between these dates.
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The CT600L forms part of version 3 of the CT600 and so applies for all accounting periods starting on or after 1 April 2015, as confirmed in the rubric in the heading on the form.
However, in order to avoid changing the presentation of existing, settled R&D claims in the tax computation or return, we have applied a further date control of periods of account ending on or after 1 April 2020:
• Periods ending before 1 April 2020 – By default these periods will be unchanged in this release, even where the CT600 (2021) becomes active from 1 April 2021. A new Amend R&D claim following the introduction of CT600L? flag is provided on the Submission options input statement to enable the new disclosure where such a return is to be
submitted to HMRC on or after 1 April 2021. An e-filing validation error will be
encountered if trying to submit a return including an R&D claim for such a period without this flag being set.
• Periods ending on or after 1 April 2020 – By default the new CT600L treatment will be enabled automatically. However, for situations where the computation may have already been submitted early under the existing provisions, the same Amend R&D claim
following the introduction of CT600L? flag can be used to set the computation and return back to the previous approach. In such a case, where the application of the
CT600L has made a change to the calculated treatment, users will see one or more of the existing diagnostics that reconcile RDEC entries made on the Corporation tax payments statement appearing:
Changes made in Alphatax
The calculations presented within the CT600L largely align with the treatment that Alphatax already applied for the RDEC set off amount. Certain changes have been required however to fully align with the CT600L:
• The R&D expenditure credits – set off amount statement has been moved to appear under the existing CT600 supplementary forms section of the contents tree in input mode. This change applies for all periods; however, a note will be displayed to clarify where the CT600L is not actually being printed as a result of the application date controls referred to above.
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• HMRC validation rule 9722 prevents a company from claiming RDEC on both large
company expenditure (CTA 2009 s104J-L) and SME sub-contracted (s104C) or subsidised (s104F) expenditure within the same accounting period. We have introduced a new diagnostic that will advise where users have populated both the large and the SME qualifying expenditure fields.
• A new analysis section has been added to the existing R&D expenditure credits – expenditure analysis statement where an SME company has incurred qualifying expenditure in a period in which the rate of the RDEC changes. These additional fields reconcile expenditure between the sub-contracted or subsidised categories provided in the legislation, and are used to populate the equivalent breakdown for the credit claimed in boxes L185 and L190. A diagnostic will be displayed where there is an unreconciled amount.
• For a company that is a partner in a firm, Alphatax presents an existing input on the R&D expenditure credits – set off amount statement for the amount of any RDEC claim
allocated from a partnership to be entered. This field is now supplemented by inputs for the corresponding amount of expenditure to be entered for the purposes of boxes L10, L185 and L190.
• When considering s104N Step 1, the CT600L validation rules require that the corporation tax liability as entered in box 475 on the main company tax return is used. As part of this, any deduction for income tax deducted from profits is considered. For companies with other liabilities chargeable to corporation tax in boxes 480 to 505 – which comprise loans to participators, bank levy and surcharge, and RFSC – a just and reasonable apportionment of the income tax deduction is permitted. Alphatax has been updated to follow this calculation including a default pro-rate for income tax deducted, with a new input provided on the R&D expenditure credits – set off amount statement to override if a different, just and reasonable basis is more appropriate.
• We have amended a function that rounded mathematically within the net value of the set off amount calculation to now round up in order to ensure Alphatax does not calculate a result that fails HMRC’s validation rules.
Areas of uncertainty or departure from existing Alphatax treatment
The way in which the CT600L must be populated is defined by HMRC through a combination of: • the rubric against boxes on the paper form,
• the updated company tax return guide, and • the validation rules applied upon e-filing.
In some cases, the specified approach differs to the approach that Alphatax has taken previously. For the time being, we are in general following the advice given however we are seeking clarification from HMRC on several of these areas and will update customers with any required changes in due course.
• The validation rules applied on the CT600L require amounts under Step 1 of s104N to be offset against corporation tax before any other RDEC amounts, such as Step 2 amounts brought forward under s104O. The legislation at s104O(5) however specifically states that Step 2 amounts brought forward should be deducted first.
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• The guidance notes state that box L20 within the “Step 1” section on the form should include brought forward amounts under step 2 or step 3. Amounts restricted under step 3 are treated as an amount of R&D expenditure credit of the next accounting period under s104N(2) and so this treatment on the form makes sense. Step 2 restrictions are not treated in the same way; however, these amounts discharge the corporation tax liability of future accounting periods under s104O(2). We cannot presently see a correct way of populating the remaining boxes on the form if these step 2 brought forward amounts are included in box L20. We are therefore not doing this for now and are seeking clarification from HMRC.
• The calculation defined in the validation rules for the net value of the set off amount in box L65 we believe does not take account of any RDEC amounts brought forward that may be included in box L20.
• The CT600L does not allow for a restriction on the payment of the credit under s104S. We have removed our corresponding input for now.
• SME tax credit claims are no longer included in box 530 for most companies. Only the component of this amount that is treated as netted off against any other liabilities chargeable to corporation tax in boxes 480 to 505 will be included in box 530.
Not included on the form
The CT600L does not capture all aspects of research and development that may be included in the tax computation. Examples of areas that are not included are as follows:
• Any of the following RDEC claims entered on the Corporation tax payments input statement in Alphatax:
o Group claim under s104O(3) CTA 2009
o Step 4 claim from another AP [s104N CTA 2009] o Step 5 claim from a group company [s104N CTA 2009]
• 130% additional deduction to trading profits for SMEs under CTA 2009 s1044
Non-resident company tax return SA700 (2021)
This edition of Alphatax includes the recently released form SA700 (2021) – Tax return for a non-resident company liable to Income Tax.
The amendments to this year’s edition of the form relate entirely to the Finance Act 2019 changes which brought non-resident companies in receipt of UK property income into the charge to corporation tax rather income tax from 6 April 2020. The pages relating to FHL and property income have accordingly been removed from the SA700 2021.
The form does still include the following existing sections:
• Income from trading in the UK – other than through a UK permanent establishment • Offshore receipts in respect of intangible property
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Alphatax has been updated to remove the property related statements where a computation is marked as a non-resident company from 6 April 2020.
In previous releases – after judging that the majority of non-resident companies were required to complete the form SA700 as a result of income from a property business – we included changes that automatically transition the companies into corporation tax rules upon rolling forward into the period beginning on 6 April 2020. A dialog is displayed to advise with a link to a Help page that provides further information:
The existing Is this a non-resident company or other entity liable to Income Tax (SA700)? flag on the Standing data input statement is accordingly no longer used going forwards. In the period beginning on 6 April 2020 this flag will appear as Is this a non-resident company or other entity formerly liable to Income tax which has
transitioned to Corporation tax (CT600) in this period? with a Yes setting prompting Alphatax to apply certain transitional rules in the corporation tax computation.
A new version of this existing flag has been created for non-resident company computations going forwards (ddname: nrl.cl20). Should you wish for a computation that Alphatax is automatically transitioning to corporation tax rules to stay within the income tax regime, you can move the Yes entry to this new flag in order to prompt the SA700 to be retained.
Partnership tax return SA800 (2021)
This edition of Alphatax include the recently released form SA800 (2021) – Partnership Tax Return and all supplementary pages. The associated e-filing schema is also included. The changes to this year’s edition of the form are:
• New boxes for the Amount of CJRS grant(s) and Job Retention Bonus incorrectly claimed which has been included in the trading pages of the return and on the
partnership statement. A corresponding input has been added to the trade Accounts adjustments input statement.
• A new tick box for Nominated partner declaration that all coronavirus support payments received have been included as taxable income? included alongside the declaration on page 8 of the form. A corresponding input has been added to the Return details statement, and the existing diagnostic 30 - Partnership signatory name and declaration required – will prompt users to complete this field for all partnership computations.
• Boxes 7.10 – 7.13 relating to interest distributions have been removed from the Saving and investments supplementary form.
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6. Specialist companies
Non-resident companies
Non-resident companies in receipt of UK property income have been brought into the charge to corporation tax, rather than income tax, with effect from 6 April 2020 following changes
included in Sch 5 Finance Act 2019. For the V19.1 edition we introduced changes that caused Alphatax to apply the relevant transitional provisions based around this legislative date. Feedback from customers however has highlighted that in some cases, non-resident computations were still being prepared for the period to 31 March – in line with past HMRC concessionary treatment in respect of basis periods – in which case the rules would not be applied.
For this edition, we have now added a new Apply final income tax period transitional rules of Part 3 Sch 5 FA 2019? flag to the Standing data input statement that will allow the relevant transitional rules to be manually applied for a non-resident company period that does not end on 5 April 2020.
Alphatax will automatically apply corporation tax rules in the following period. Where that period is the first period of the computation, a further newly added Apply first corporation tax period transitional rules of Part 3 Sch 5 FA 2019? flag may be used.
We have also introduced a small clarification change to the narrative for the row of the Non-resident company property income and Non-Non-resident company furnished holiday lettings report statements that is used to illustrate unused losses being grandfathered as part of the transition to corporation tax rules.
Creative industries
We have resolved an issue with the calculation of the Group relief surrender amount on the trade Losses statement which caused a mismatch between this and the Group relief surrenders report statement.
This issue affected the carried forward balance of post-1 April 2017 losses in the trade for theatrical, orchestral, and exhibition trades in completion period or later periods only. Note that this issue has been addressed without an application date.
We have introduced corrections throughout the creative industry calculations where trade translation mode is in use to ensure that amounts are converted correctly, which in particular affected group relief surrenders and offsets of amounts against total profits. The application date for these changes in general is periods ending on or after 30 June 2020. A subset of these changes were presentational only or just cleared an unexplained difference in the tax accounting proof or reconciliation and so no application date has been used for these.
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Banking companies
SI 2020/1188 – The Bank levy (Loss absorbing instruments) Regulations 2020 – come into force for periods ending on or after 1January 2021, changing what is included as Tier 1 capital and liabilities defined in para 15V of Schedule 19 FA 2019, which in turn affects the loss
absorbing instruments reduction under para 15X.
On the Bank levy statement in Alphatax we provide inputs for the amounts of any Tier 1 capital and liabilities and Loss absorbing instruments reduction to be entered, and so having reviewed the legislation we have determined that no changes are required to our calculations. Users may need to be aware however that the legislative basis behind these entries has been changed.
Partnerships
• We have amended the Partnership trading income and equivalent property and furnished holiday lettings input statements by adding a new column with the relevant SA800 box numbers in order to help users in populating the form. This change has been made for partnership computations populating the 2019-20 version of the return and onwards. • We have addressed an issue which caused entries made on the Partnership statement to
be hidden in scenarios where the corresponding partner had either been deleted or no name had been entered on the Partner details input statement. This caused diagnostic 1172 (Partner is not a member of the partnership for this accounting period but has profits allocated on the Partnership statement) to correctly display, however, the relevant allocation inputs could not be removed.
The partner allocation columns will now be displayed to allow the invalid entries to be removed.
• We have addressed an issue where our automatically generated notes used in box 3.116 were missing a £ symbol. This was due to an E-filing issue with HMRC servers. This has subsequently been fixed and so the notes have now been updated to include the missing £ symbol.
Life assurance companies
Corporate capital loss restriction
We have updated the corporate capital loss restriction calculation in periods straddling 1 April 2020 where Non-BLAGAB losses brought forward are offset against BLAGAB capital gains and BLAGAB losses brought forward are offset against Non-BLAGAB gains.
For the purposes of the restriction, net gains/losses have been split between pre and post-commencement period in accordance with para 44 of Schedule 3 FA 2020. The offset against pre-commencement gains is not restricted under Part 7ZA of CTA 2010.
When calculating BLAGAB gain in the pre-commencement period for the purposes of the unrestricted Non-BLAGAB loss brought forward offset, net BLAGAB gain in the
pre-commencement period is reduced by BLAGAB loss brought forward and subsequently by the current year BLAGAB loss if applicable. The same principles apply to calculating Non-BLAGAB gain in the pre-commencement periods for unrestricted Non-BLAGAB loss brought forward offset.
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Losses brought forward that are not utilised in the pre-commencement period are carried forward to the post-commencement period and are restricted under s269ZBA or s269ZFC CTA 2010.
The gain/loss split between the periods is based on the disposal dates when Capital disposals list statements are used. Gains/losses entered in the Other disposal section on the Chargeable gains summary / Capital losses summary statements are treated as incurred in the post-commencement period by default. Use Other disposal - pre-post-commencement gains/losses included above inputs to reallocate them to the pre-commencement period.
Existing overrides in the Claims – chargeable gains and losses input statement can be used to restrict the calculated offsets. They affect the overall offset of current period and brought forward loss.
When the overrides are used in the straddling period, the manually restricted offset is firstly allocated to current year losses, subsequently to brought forward losses in the
pre-commencement period and finally to brought forward losses in the post-pre-commencement period.
Tax accounting
We have addressed a minor casting issue with the presentation of tax base opening balances in respect of TCGA 1992 s212 deemed gains on the IFRS deferred tax balance sheet
statements. The tax provision calculations were already correct and are unaffected.
Miscellaneous life assurance company changes
• Following a Finance Act 2020 change to s93 FA 2012 – which now provides that for the purposes of the minimum profits test, it is assumed that non-BLAGAB allowable losses cannot be deducted from BLAGAB chargeable gains – the existing Policyholder deferred tax deduction from BLAGAB trade profits before non-BLAGAB capital loss offset – override input on the Claims – chargeable gains and losses statement has become redundant. This input has therefore now been removed where not already used. • The policyholder tax deduction from BLAGAB trade profits for the purposes of the
minimum profits charge has been amended to exclude the effect of the Non-BLAGAB capital loss deduction.
• We have addressed an issue which caused diagnostic 1692 (Confirm Non-BLAGAB loss b/f for the purpose of Relevant profits [A] calculation) to incorrectly appear where the computation did not contain any pre-1 April 2017 losses. As the diagnostic was invalid in this scenario, we have addressed this without an application date.
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7. Miscellaneous changes
IFRS 16
IFRS 16 – Leases – is an accounting standard which became mandatory for periods of account beginning on or after 1 January 2019, replacing IAS 17. This standard made significant
changes to the way in which leases are recognised in the financial statements of lessees. The distinction between an operating and finance lease is removed in nearly all circumstances, and instead a single lease accounting model was introduced which requires lease
arrangements to be recognised as an asset on the balance sheet of the lessee.
For the version 19.0 edition of Alphatax we introduced initial changes in response to this standard including a free-format template designed to help track any transitional adjustments upon adoption and changes to the definition of a “short lease” for the purposes of long funding lease capital allowances.
Following further feedback from customers, this edition now includes the following additional changes in relation to IFRS 16:
SP3/91 Fixed assets column
Where IFRS 16 is applied the correct treatment for tax purposes is to follow the accounts, with a deduction for interest and properly computed depreciation being allowable. HMRC’s view on this was first set out under Statement of Practice 3 (1991) and is discussed in more detail at HMRC manual BLM32210 onwards.
This is the treatment that previously applied for finance leases under IAS 17 (and continues to be the approach under FRS102). The effect of IFRS 16 is that leases that would be described as operating leases are now also included.
Alphatax provides for the treatment of allowable depreciation through the Finance leases SP3/91 column on the Fixed assets statement. Capital expenditure can be categorised to this column and any depreciation entered will be allowed in the tax computation, either in the trade or for non-trade via inputs on the Management expenses input statement.
In this edition for computations prepared under IFRS or FRS101, reflecting the impact of IFRS 16, this column will now be renamed RoU leases SP3/91, removing the specific reference to finance lease amounts:
The equivalent terminology change has also been made to the other statements and areas of the computation that interact with this column, such as in the Depreciation and
amortisation analysis section of the Depreciation and amortisation statement, in the AA
tax categoriser and on the fixed assets related free-format templates provided. This change applies for periods of account ending on or after 30 June 2020.
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Corporate interest restriction
An effect of IFRS 16 is that a different treatment for operating lease amounts is imposed when compared to the approach for equivalent amounts under FRS 102. Whilst for the tax
computation generally HMRC accept that the accounting treatment should still be followed, for the purposes of the corporate interest restriction it was determined following consultation that a level playing field should be retained regardless of the accounting standard used.
Legislation was accordingly introduced by Schedule 14 of Finance Act 2019 to achieve this. Companies applying IFRS 16 are required to continue to classify lease transactions as either a finance lease or operating lease for the purposes of the corporate interest restriction.
The classification test that would apply under FRS 102 or IFRS 16 for lessors should be used and the definition of a “finance lease” within the corporate interest restriction rules, at s494 TIOPA 2010, makes reference to this notional test:
For transactions classified as finance leases, interest falls within the definition of tax-interest under Condition C of s382 TIOPA 2010 (or s385 in the case of interest income).
These amounts are accordingly not brought into account for adjusted corporation tax earnings under the general exclusion for tax interest at s407(1)(a). Allowable depreciation in respect of a finance lease is also ignored for the purposes of adjusted corporation tax earnings under s460(1)(d).
Operating lease amounts in contrast are not subject to any specific treatment in the corporate interest restriction legislation. Interest does not fall within the definition of tax-interest and so is allowable for adjusted corporation tax earnings, as is depreciation.
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This edition of Alphatax includes the following enhancements to allow for the appropriate treatment of these amounts:
• Interest – we have made use of the existing CIR condition column on the loan relationships statements which previously appeared where the Enable item level categorisation of tax-interest amounts? configuration option was switched on. This column will now also be enabled for computations where IFRS 16 applies and will include a single “Operating” category which may be used to classify loan relationship rows as relating to operating lease transactions:
The sum of these amounts will not form part of tax-interest and will be included in adjusted corporation tax earnings instead.
• Depreciation – a new input has been provided for the amount of any allowable
depreciation under SP3/91 to be classified as relating to operating leases. This input will appear next to the existing depreciation field, which is either on the Depreciation and amortisation input statement for computations where accounts analysis is in use, or otherwise on the Fixed assets statement:
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An entry in this new field will cause Alphatax to separate out the existing adjustment for allowable depreciation on the trade Accounts adjustments report statement into a new operating lease component:
The correct treatment for adjusted corporation tax earnings is driven from there, with only the finance lease component treated as an ignored amount:
An equivalent field has also been added to the Management expenses input statement for companies with an investment business.
These new inputs are available for IFRS for FRS 101 computations where the period of account begins on or after 1 January 2019 and where the Corporate interest restriction input statement is enabled.
SP3/91 leases reconciliation statement
Following on from the changes above, the SP3/91 column on the Fixed assets statement is now used for more amounts than was the case previously, and the corporate interest restriction calculation also requires a level of additional analysis to be performed on the amounts in respect of depreciation and interest.
To further assist users, we have now introduced a new, optional reconciliation statement for the SP3/91 column.
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This statement is titled SP3/91 leases reconciliation and will sit within the Balance sheet analysis section of the contents tree:
The statement appears as follows:
The statement will feature a repeating row table and include three main sections for columns: • Cost – basic memo entries for the Brought forward amount of cost along with any
Adjustment or Movement in the period.
• Net book value – these columns will fully reconcile amounts entered in the SP3/91 column on the Fixed assets statement with the amount Brought forward being supplemented by any Additions, Disposals or Other movements before arriving at the Carried forward position. Unreconciled amounts will be presented above the column totals where the statement does not agree to Fixed assets, and where the user uses this reconciliation statement these unreconciled amounts will trigger corresponding
diagnostics.
• Interest – any finance charge may be recorded for each row.
The statement is compatible with both Accounts Analysis and free-format computations, and is available for FRS 102 computations as well as those considering IFRS 16. The statement is available for periods of account beginning on or after 1 January 2019.
Where IFRS 16 applies and the corporate interest restriction is relevant, the statement will feature an Operating lease column that will allow for individual rows to be distinguished from finance leases.
The depreciation and interest amounts entered in these columns will then be totalled separately, and these will then be reconciled back to the amounts entered for the accounts adjustments and operating lease interest routes detailed above.
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Miscellaneous IFRS 16 changes
• As part of the development, we noted that Fixed asset depreciation allowed under SP3/91 entered on the Management expenses statement was not being ignored for adjusted corporation tax earnings correctly and excluded amounts of management capital allowances were not being added back correctly in the rare scenario where net management expense credits had arisen. We have now addressed these issues. • Alphatax automatically adds back depreciation per the P&L in full on trade Accounts
adjustments, before re-allowing a deduction for SP3/91 depreciation. Although this results in two tax adjustments being used when effectively none could have been needed, this approach produces improved disclosure where other amounts of
depreciation are present and allows for clearer links back to both the P&L and fixed asset statements.
For XBRL purposes however, Alphatax previously also followed this approach and tagged the full add back of depreciation as
“AdjustmentsDepreciationAmortisationAndLossOrProfitOnSale” before then re-allowing SP3/91 depreciation under general tag “AdjustmentsFinanceLeasingAdjustments”. This was potentially misleading, and furthermore would not have been compatible with the approach of include operating lease amounts within the SP3/91 treatment.
For this edition therefore, we have now moved the SP3/91 depreciation component of the “AdjustmentsFinanceLeasingAdjustments” tag to be netted off within depreciation. The effect of this is that the tagged depreciation amount will now represent only the amount that is disallowable. This tag has accordingly been moved to the hidden Additional
e-filing disclosure section of the trade Accounts adjustments report statement.
The equivalent change has also been made for impairment and profit or loss on disposals.
This change does not produce a visible change in the tax computation and is only
relevant for new e-filing submissions and so has been made without an application date.
Corporate interest restriction
API submission mechanism
HMRC have announced that they are developing an Application Programming Interface (API) for the Interest Restriction Return. This will allow third party software developers to submit this return directly to HMRC electronically, replacing the present GOV.UK portal which requires taxpayers to manually rekey information and upload the report.
Draft APIs have been published for the following submissions: • Submit full return
• Submit abbreviated return • Appoint nominated company • Revoke nominated company
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There is presently no announced timeframe for the introduction of this submission approach. HMRC have stated that eventually they intend for this to become mandatory, but this will require legislation to be enacted in due course. The existing service will run alongside the API initially, and HMRC will ensure that customers are able to file via the mandated routes before bringing this into force.
We are intending to introduce support for this submission mechanism in a future release. In the meantime, for this edition we have performed a review of the API endpoints against the information held in Alphatax. The majority align with our existing IRR reports.
There are a limited number of additional fields and so we have introduced a new Interest restriction return API input statement presenting these so that users may familiarise themselves if they wish to. The main example that may need to be considered is the Total number of companies within the worldwide group. The fields on this statement are presently not used by Alphatax.
In addition, where it was appropriate to do so we have incorporated changes prompted by the API into our existing interest restriction statements. An example of these changes is the ultimate parent Jurisdiction of incorporation field which now a drop down input, listing the countries specified in HMRC’s schema.
We will update customers with further details of our plans regarding supporting the API submission mechanism in due course.
Interest allowance brought forward
For periods ending on or after 30 June 2020, we have corrected an issue on the Interest allowance brought forward statement in the Group module whereby any reactivations for the return period were not being considered correctly in all circumstances.
The interest allowance unused in a period will now consider any reactivations for the period, which in turn will correct the interest allowance brought forward calculation in future periods. An override input remains available for periods that were affected by this issue.
Qualifying infrastructure companies
We have extended our functionality for qualifying infrastructure companies to now include adjustment inputs on the Group-interest and group-EBITDA input statement. Under TIOPA 2010 s442, adjusted and qualifying net group-interest are determined on the basis that
exempt amounts of QIC companies were left out of account, and group-EBITDA is calculated as if the QIC companies were not a part of the group.
The new adjustment inputs now allow for a more detailed level of analysis, starting with amounts included in the accounts of the group and then showing separately any adjustments made for QIC companies.
Note that Alphatax calculates QNGIE based upon ANGIE, and so care should be taken to
ensure that any adjustment to QNGIE does not double count an adjustment already included in ANGIE.
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Joint ventures
• Joint venture enterprises are not under full control of any particular group and so will not be included in the worldwide group of investors for CIR purposes, and will not be fully consolidated in the accounts. The accounts may include a share of profits however and in addition, depending on whether the joint venture is regarded as transparent or opaque, the tax amounts for interest and earnings may be include allocations from the joint venture.
In order to compensate for any possible differences in treatment of interest and earnings of joint ventures for accounts and for tax purposes, the corporate interest restriction rules include two elections that an investor group may make: non-consolidated
investment under Sch 7A para 17; and consolidated partnerships under Sch 7A para 18. The effect of these elections – from TIOPA 2020 s427 and s430 respectively – is that adjustments are brought into account in determining adjusted and qualifying net group-interest and group-EBITDA. These adjustments primarily affect the investor group computation only, but in some cases the joint venture group is also affected. For this release, we have now included additional inputs on the Group-interest and group-EBITDA input statement which will allow for any required adjustments to be entered.
• The qualifying infrastructure company rules result in tax-EBITDA being treated as nil, which can result in a restriction on interest expense applying. For a joint venture QIC company, where the investors are also QIC companies, the treatment of interest between the joint venture and investor groups is aligned. Where the joint venture QIC has both QIC and non-QIC investors however, the treatment can lead to a less favourable result for the non-QIC investors.
The corporate interest restriction rules accordingly include an election that may be made for these situations under TIOPA 2010 s444. The election has several effects including that the exemptions that would normally apply to tax-EBITDA, tax-interest income and tax-interest expense are reduced to the “qualifying proportion”, being the share in the joint venture owned by QIC companies.
For this edition we have now added a new input to the Membership details input statement which, for companies who have made a QIE election, allows a joint venture qualifying ownership percentage to be entered. Alphatax will then automatically adjust the QIC exemption applied on the Statement of calculations based on this entry.
Other special company types
• For securitisation companies, SI 2006/3296 regulation 22 defines Adjusted corporation tax earnings as being equal to the negative of the “amount of any management fee paid in that period by the securitisation company to another UK group company in relation to the management of assets held by the securitisation company for the
purposes of the capital market arrangement”. In addition, Net tax-interest income is defined as the sum of this management fee amount and the amount of profits calculated under regulation 14.
In this release, for a securitisation company calculating its profit under regulation 14, a new input will appear on the Adjusted corporation tax earnings statement to enter the Management fee paid. The Corporate interest restriction statement will automatically calculate the amount of net tax-interest income based on this input, and regulation 14 profits derived from the securitisation company statements.
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The changes will apply to periods of account ending on or after 30 June 2020. [ • Within the Authorised Investment Fund regulations of SI 2006/964, regulation 13
provides that certain distributions of income are treated as interest rather than
dividends, and accordingly may be brought into account in the tax computation as loan relationships. The intention of the AIF regulations generally is to move the point of taxation from the fund to the investors, however a consequence of this rule is that the corporate interest restriction could unintendedly limit any deduction for this ‘interest’. An amendment was accordingly introduced to regulation 18 during 2017 which provides that an interest distribution is not treated as being tax-interest expense for the purposes of the corporate interest restriction. The same changes were also introduced for PAIFs and TEFs, which are two particular types of AIF.
For periods of account ending on or after 30 June 2020, Alphatax will now not include any interest distributions under SI 2006/964 on the Non-trade loan relationship debits statement as tax-interest expense for CIR purposes. The amount will accordingly feed into the adjusted corporation tax earnings instead, on the basis that it is brought into account in the tax computation for the company and is not excluded.
Miscellaneous corporate interest restriction changes
Following requests from users, we have moved the tax accounting configuration option
Recognise disallowed tax-interest expense as a deferred tax asset? from the Corporate interest restriction section on the Group information statement to the Tax accounting
configurations options statement.
Intangibles
• For periods ending on or after 30 June 2020 we have resolved an issue on the trade and Non-trade intangibles capitalised amounts statements whereby Alphatax incorrectly switched off the fixed rate allowance calculation in situations where an intangible asset was purchased and then partly disposed in the same period.
• In version 19.0 we provided for restriction to debits in respect of goodwill and certain other assets as Chapter 15A CTA 2009 introduced in Finance Act 2019. However, we added this functionality for the trade statement only following the approach previously for similar changes included in Finance Act 2015. In this version, we have now included these changes for the Non-trade statement.
Capital disposals
We have addressed an issue on the Capital disposals report where the indexation column was not appearing in scenarios where the Market value at 1982 input was used while all other cost amounts had dates post-31 December 2017.
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Group relief
• In this version of Alphatax we have added a new breakdown details statement on the Group relief surrenders (CT600C(2)) statement to show how the trading losses available for surrender has been derived. This statement will be particularly useful for creative industries, as the status of the creative industry trade affects which losses may be offset. • We have addressed a minor presentational issue on the Group relief carried forward
surrenders input statement for translation mode computations whereby the loss amounts returned in the sterling column of the Carried forward amounts available for group
relief surrender section for the second accounting period were being translated at the
exchange rate of the first period. The tax rule calculations for the amount surrendered were correct and are unchanged.
Real estate investment trusts
• In this version of Alphatax for periods ending on or after 30 June 2020 we have updated the REIT ratio calculations statement to increase the number of values taken from the company file into the REIT financial statements with group. This should reduce the number of manual inputs required within the group REIT financial statements. In the V19.0 edition of Alphatax we enabled the Is this property business
tax-exempt under the REIT provisions? flag for a residual REIT computation to allow the relevant tax analysis to be prepared in a single computation. This included enabling the loan relationships statements within the property businesses. Previously however the tax categoriser was not updated. We have now addressed this such that accounts analysis amounts may be tax categorised to the loan relationships statements in the tax-exempt activity of the company.
Capital allowances
In periods which straddle a change in the annual investment allowance limit, Alphatax presents additional columns for the periods which are pre, middle, and post the limit change. The
expenditure amounts for the pre and middle periods are inputs and the post period amounts are calculated as the difference between these inputs and per computation amounts. The post amounts were previously unrestricted which could result in negative capital allowances arising depending on amounts entered. These calculations are now restricted to be positive only, which also addresses potential display rule issues on the input statement where amounts are entered and then removed.
Fixed assets
We have updated footnote retrievals for the NBV brought forward row on the Fixed asset statement – where positioned within the Balance sheet analysis section of the contents tree – that were previously missing.
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Investments
For this edition we have introduced a new statement that will allow users to track a company’s investment expenditure. The Investment expenditure summary provides a standardised
statement design which keeps a record in the tax computation of details of any investments in subsidiaries.
Inputs are provided for cost and impairment brought forward, additions, transfers in or out, disposals, any other movements in the period.
By default, Alphatax allows for Cost and Impairment movements to be entered separately. Net book value can optionally be tracked instead using the Enter NBV for Investment expenditure summary? flag provided on the Accounts analysis options input statement:
Alphatax also allows for impairment losses recorded on the Profit and Loss account to be tax categorised through to this new statement. If the amount is recorded in other comprehensive income then a further input is provided to reflect this.
Long funding leases
The taxes acts provide specific rules for the taxation of long funding leases. Contrary to the legal position, to reflect the economic substance of the arrangement the lessee is treated as owning the asset for the purposes of claiming capital allowances. A corresponding restriction is applied on the deduction of rental payments, and conversely a reduction on income is provided to the lessor. We have added the following improvements to the existing long funding leases calculations in Alphatax:
One of the conditions within the definition of a “long funding lease” under CAA 2001 s70G is that the lease must not be a “short lease”. A short lease in turn is defined under s70I as one whose term is for less than 7 years (for leases entered into on or after 1 January 2019). Alphatax will accordingly display a diagnostic where the long funding leasing statements are used to enter details of a lease whose term dates are for less than 7 years.
This rule however can be overridden upon a transfer whereupon, provided the relevant conditions are satisfied (s70W for lessors and s70X for lessees), a new lease is treated as commencing but that lease is deemed to be of the same description as the original lease, i.e., the new lease will still be considered a long funding lease if the original lease was. For this edition, we have now added a new accessory statement flag that may be used to confirm that the relevant transfer conditions are met which in turn will suppress the associated diagnostic.
