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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 6

Accounting period 1.1.94 to 31.12.94 Accounting period 1.1.95 to 31.12.95
CT profit £100,000 CT profit Nil
Tax @ 25% £25,000 Surplus ACT £25,000 carried back to 1994
No tax paid  

Liability accounting period ended 31.12.94 after carry-back becomes:

Tax chargeable £25,000
Less ACT carried back from accounting period ended 31.12.95 £25,000
  * * *



Late payment interest is chargeable on £25,000 from 1.10.95 (normal due date for accounting period ended 31.12.94) to 1.10.96 (interest effective date of the carry-back).

Accounting period 1.1.06 to 31.12.96 CT profit Nil
  Trade loss £100,000
  Relief claimed by carry-back to 1994

No additional late payment interest would have been chargeable for 1994 if the carry-back claim had not been made. This is because the liability was already satisfied by the ACT carry-back claim. COTAX would incorrectly charge interest, see (b) of CTM92420.

Note: If the company subsequently claims to surrender the displaced 1995 ACT it then ceases to be available for the purposes of the interest computation required by TMA70/S87A (6). In other words, it is no longer the case that, if the claim to carry back the 1996 loss had not been made, the liability of 1994 would have been satisfied by the carry-back of surplus ACT of 1995. In these circumstances further late payment interest is chargeable from 1.10.96 to 1.10.97 (the interest effective date of the loss carry-back).

This is in contrast to the position illustrated in CTM92255. In that example, the surrender of the non-trade charges was only made possible by the loss carry-back claim. In this example, the ACT could have been surrendered anyway. Once surrendered it is no longer a relief that ‘would have been due if the carry-back claim had not been made’ - see (b) of CTM92420. COTAX would handle this case correctly at this stage.

When a displaced relief is surrendered to another company COTAX gets the interest consequences right.