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HMRC internal manual

Company Taxation Manual

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

Under ICTA88/S393A, 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 FA96/S83 (2)(c) 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 - CTM92256 preceded by a summary of those examples at CTM92250.