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HMRC internal manual

Capital Allowances Manual

PMA: FYA: First-year tax credits: recovery of tax credits

FA98/Sch 18 para 52, CAA01/s45B, CAA01/s45H, CAA01/Sch.A1 para 27

Where it is found that a first-year tax credit payment made was, or has become, excessive an assessment should be made to recover the amount overpaid. A payment may become excessive in any of the following circumstances:

  • a company may decide to amend its return (within the time limit allowed) to claim relief for its losses in another way rather than surrendering them for a first-year tax credit.
  • an enquiry into a company tax return may conclude that a tax credit claim was excessive.
  • a certificate of energy efficiency or environmental benefit may be revoked (CA23135 and CA23140).
  • a company may dispose of the plant and machinery within the clawback period (CA23190).


The assessment is treated as an assessment of the accounting period for which the tax credit was paid. Interest is charged on an assessment from the date the payment being recovered was made until the assessment is paid.

A company cannot claim for any losses, for example under ICTA88/S393A, to be set against the assessment.

These assessments cannot be made in COTAX, instead a CT10(Z) set must be used. The assessment must be recorded on the CTA/CTC computer system within IRIS, by Input via terminal (IVT) - INP457. Guidance on INP457 can be found in the appendix to COTIN13.