CT61- Concept Procedure and Applications


UK Companies (including non-resident companies trading from a branch or agency in the UK and local authorities) are required to deduct IT (Income Tax)or pay tax on followings while dealing with individuals, overseas companies or partnerships:

  • specified annual payments including directors loan,
  • Interestpayments (other than to UK banks)
  • Royalty payments,
  • an alternative finance payment and receipts or any similar relevant distribution made
  • Received ‘manufactured’ interest from abroad

Organizations pay these taxes to the HM revenue and Customs (HMRC) via CT61 Return quarterly (period of three months) based on the normal calendar year. However,if Organizations year-end accounting is on different date, then balance sheet preparation date is deemed to be a quarter end including five return period.

CT61 is a specific type of form which is used for claiming interest returns, income tax returns as well as returns on alternate financial payments. Companies further claim return on manufacturing payments from foreign lands as well as tax on certain distributions. Once the return period is complete, organizations share CT61 Return showcasing their payments associated with that period.

Laws Governing CT61 Returns

The major provisions that cover CT61 Returns are found in Part-15; Chapter-15 of the IT (Income Tax) Act 2007. The act is also referred as ITA. A company eligible for CT61 returns can be:

  • Body corporate
  • Unincorporated association
  • Open-ended investment firm or unit trust
  • Building society, deposit taker or local authority

While 15-ITA is not applicable to partnerships, interests, alternative financial payments and annual payments are covered under Part-15 ITA. CT61 might also be utilised for payments associated with relevant distributions by an organization or principal organization or any group within Part-12 of the CTA 2010. If an organization pays interest on director’s loan, it is essential to register it with HMRC as well as file the CT61 returns as it requires the organization to deduct 20 percent on interest. This interest is declared on personal tax returns of the Director. However, it can be tax-free considering the interest covered is within PSA (Personal Savings Allowances). Businesses are often uninformed or ignorant of this critical requirement which makes them susceptible to penalties or related mandatory payments.

CT61 procedure

When UK organizations make certain payment types, the process involves deduction of income tax amount at the source & paying it to HMRC. It is important to keep account of the income tax records on quarterly basis via CT61 return; which is based on the amounts paid & received within the quarter. A quarter end is based on typical calendar year which is 31st March, 30th June, 30th September & 31st December. On the other hand, if an organization’s year ending does not match with these typical calendar year, the firm’s balance sheet will be considered as quarter-end and 5 return periods will be recognised.

The instances in which organizations might deduct IT at source include yearly interest payments to individuals, foreign partnerships or overseas companies and certain royalty payments. The yearly interest is computed on loan which can last for more than twelve months. Since HMRC is majorly concerned with collection of tax that are otherwise difficult to pursue, the company can apply for several reliefs & exemptions from the need to withhold. Specifically, a UK-based organization does not need withholding tax from the interest payments to another UK-based organization. In addition, an organization will be able to withhold tax returns at reduced rate if the recipient qualified for specific relief under DTT (Double Tx Treaty) or where provisions of EU Interest & Royalty Directive are applicable. Tax deduction from interest payments takes place at a fundamental income tax rate in-force during the time of making payment, unless it is reduced under Double-Tax Agreement. Basic rate at present is 20 percent.

Timeframe for Returns

It is essential to make the returns within fourteen days of end of CT61- return period. It should be made together with relevant income tax payments. Interest will be charged on overdue amount. In case of incorrect or overdue return, Inspector might create as assessment which is ITA- 2007, s 956.

CT61 form content

The return form CT61 comprises of three major parts. The first part is income tax amount on the annual payments & interest paid. The second part is income tax returns on any abroad-based ‘manufactured’ interest. The third part is income tax returns deducted from the annual payments & interest received. All informed must be filled in a transparent and authentic manner.