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HMRC internal manual

Capital Allowances Manual

PMA: FYA: First-year tax credits: restriction of the tax credit payment

CAA01/Sch.A1 para18, ICTA88/s826

If a company claims a first-year tax credit HMRC will pay it an amount in respect of the credit unless any of the following apply:

  • The company has outstanding corporation tax liabilities. HMRC may use the first-year tax credit (and any interest due on it) to discharge a company’s liability to pay corporation tax. Any tax credit used in this way will be treated as having been paid. The tax credit will only be used to off set corporation tax that has become due and payable; HMRC cannot use a tax credit to reduce a future liability.
  • There is an enquiry into the company’s return for the accounting period for which the first-year tax credit is claimed. HMRC may withhold a first-year tax credit payment until the enquiry into the return is completed. However, HMRC has discretion to make a provisional payment before the conclusion of the enquiry.
  • The company has outstanding PAYE or Class 1 NIC liabilities for payment periods ending in the accounting period. Although HMRC can only use first-year tax credits to cover outstanding PAYE and NICs with the company’s consent, a tax credit payment will not be made to a company that has outstanding PAYE and NICs liabilites. The meaning of payment period is explained in CA23177.


Interest under ICTA88/s826 is payable on first-year tax credits from the material date until the date the payment is made. The material date is the later of:

  • the filing date for the company’s tax return for the accounting period of claim, and
  • the date on which the company tax return, or amended return, containing the claim is delivered to HMRC.