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HMRC internal manual

Company Taxation Manual

ACT: set-off against CT on profits: form of claim

No special form of claim was required and claims contained in computations or in correspondence were acceptable providing their wording was unambiguous.

Following dicta in Procter and Gamble Ltd v Taylerson 63TC481, a claim did not have to be expressed in terms of carrying back a specific amount of surplus.

A formula claim such as:

  • ‘the whole of the surplus as eventually agreed’, or
  • ‘such amount of the surplus as can be set-off against CT on profits of (specified) accounting periods’ was acceptable where determination of the actual amount depended on agreement of the chargeable profits for an accounting period.

Such claims were in respect of an (ultimately) ascertainable amount of surplus.

This could be contrasted with the situation in Procter and Gamble Ltd v Taylerson, where it was contended that, having made a claim to carry back an ACT surplus, that surplus should be recalculated and increased to take account of events which occurred subsequent to the original claim. These events were the incurring of a trading loss in a later accounting period followed by a claim to carry back that loss to the accounting period of the ACT surplus (resulting in a reduction in the chargeable profits and an increase in the ACT surplus). Note that the operative section at that time, FA72/S85 (3), provided for anACT carry back period of two years from the accounting period of the surplus, as opposed to the later period of six years (CTM20170).

In the High Court, Vinelott J said ‘A company can only validly claim to carry back an amount of surplus ACT capable of being ascertained by reference to events which have happened when the claim is made.’ In the Court of Appeal the company’s appeal was dismissed on slightly different grounds and the Court, while indicating some reservation, decided not to consider whether the basis of Vinelott J’s decision was correct. However, this meant that his statement represented the current declaration of the law, and it should always have been relied on in dealing with attempts to reopen or extend Section 239 (3) claims.

In many cases companies may have been prepared to accept that a Section 239 (3) claim could not be extended to additional surplus ACT if it was pointed out that surplus ACTcould be carried forward and - if still surplus - carried back (see CTM20250).This treatment did however affect any repayment supplement or repayment interest due, since a repayment resulting from a Section 239 (3) carry-back was treated as a repayment for the period for which the surplus ACT arose.