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HMRC internal manual

Company Taxation Manual

Corporation Tax self-assessment (CTSA): the payment obligation: carry-back of trading losses or non-trading deficit - late payment interest

Under CTA2010/S37, a company may claim to carry back trading losses against profits of previous periods, to the extent that they cannot be set off against profits of the same accounting period (see CTM04500 onwards).  Under S37(3)(b) this is restricted to accounting periods falling within the period of 12 months ending immediately before the loss making period begins. 

FA2009/Sch 6 provides a temporary extension of the carry-back of trading losses for accounting periods ending between 24 November 2008 and 23 November 2010, allowing you to carry back trading losses to the preceding three-year period.  These losses must be fully offset against the most recent periods before carrying back to preceding periods, and there is a cap of £50,000 applying to periods included only by virtue of the extension.  (See CTM04510.)

Under CTA2009/S459 (1)(b) a company may claim to carry back a non-trading deficit on loan relationships against profits or gains arising from non-trading loan relationships in the previous twelve months.

TMA70/S87A (4A) (non-trading deficits) and (6) (trading losses) recognise that any tax remaining unpaid for the earlier accounting period for which the relief is given is being reduced by a relief which originates later.  It follows that late payment interest should continue to run until the due date for the later accounting period.

Note that in the case of trading losses, the rule is not applied where the carry-back is against profits of an accounting period falling wholly within the previous twelve months.

Section 87A achieves this by:

  • identifying the notional unpaid CT liability which would have been due if the loss carry-back claim had not been made
  • charging Section 87A interest on the unpaid notional liability so computed, up to the due date for the accounting period from which the loss was carried back.

There are examples at CTM92251 - CTM92255 preceded by a summary of those examples at CTM92250.  Full details on how COTAX deals with carry backs and what you need to do to ensure the correct interest is calculated are at COM50000 onwards.