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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 - example 5

Accounting period 1.1.94 to 31.12.94   Accounting period 1.1.96 to 31.12.96
     
CT profits £10,000 Trade loss £10,000
Non-trade charges    
Nil tax payable £10,000 ICTA88/S393A claim to carry-back to accounting period ended 31.12.94. (No profits for the accounting period ended 31.12.95)
Liability after carry-back becomes profit £10,000
   
Less loss carry-back £10,000
CT liability Nil

The non-trade charges displaced by the loss carry-back are surrendered as group relief under ICTA88/S403.

The carry-back has no consequences for late payment interest. No additional amount of CT would have carried interest if the claim had not been made. (If the claim had not been made, it would not have been possible to surrender the non-trade charges - ICTA88/S403 (3).)

Although the surrender of non-trade charges has only been made possible by the loss carry-back, it will be effective for interest purposes from the normal due date for the corresponding accounting period of the company to which it has been surrendered.

The circumstances in which the TMA70/S87A interest rule may fail to be fully effective because of the need to allow for some relief which has in fact been surrendered are fairly unusual but any cases in which the system is apparently being abused should be referred to CTIAA (Technical) with a brief report.

Note: COTAX will incorrectly charge interest in such a case, see (b) of CTM92420.