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HMRC internal manual

Company Taxation Manual

Corporation Tax self-assessment (CTSA): the payment obligation: displaced ACT carried back - late payment interest

TMA70/S87A (4B) and (7) make special provision for the case where:

  • ACT becomes surplus as the result of loss or non-trade deficit relief carried back, and
  • the ACT is itself then carried back under ICTA88/S239 (3) against the liability of a still earlier period.

Section 87A (4) applies to any unpaid tax discharged by the ACT carry-back, so that interest runs to the due date for the accounting period from which the loss or deficit relief was carried back.

Note: COTAX cannot deal correctly with cases like this without intervention. See the On-line Company Tax Manual (COM), in the ‘Claims/Reliefs’ business area.


Accounting period 1.1.94 to 31.12.94 Accounting period 1.1.96 to 30.6.96
CT liability £20,000 Trade loss £60,000
less £10,000 ACT of the accounting period ICTA88/S393A carry-back to accounting period ended 31.12.94

Liability after carry-back:

CT profit £80,000  
Less loss (from 1996) £60,000  
CT due * * *  


  @ 25% = £5,000    
  Less ACT £5,000  
  Surplus ACT £5,000  

ICTA88/S239 (3) carry-back claim to accounting period ended 31.12.93.

CT of £5,000 on profits for accounting period 1.1.93 to 31.12.93 is already covered by ACT paid on distributions made in that accounting period.

The company claims to surrender that £5,000 ACT for the accounting period 1.1.93 to 31.12.93 to a subsidiary under ICTA88/S240.

The effect of the ACT surrender claim is to create a liability of £5,000 on the company for the accounting period 1.1.93 to 31.12.93. However, this liability is then covered by the surplus ACT carried back from the accounting period 1.1.94 to 31.12.94.

TMA70/S87A (7) ensures that interest runs on the unpaid CT liability of £5,000 for the accounting period 1.1.93 to 31.12.93 from:

  • the due date, 1 October 1994 to
  • the due date of the accounting period from which the loss claim was carried back, 1 April 1997.

Repayment interest will be due on the repayment to the recipient of the ACT surrender from 1 October 1994 until the date of repayment.

The example above shows a six month accounting period ending on 30 June 1996. If this had been a twelve month accounting period, the time limit for making the ACT carry-back claim would have expired on 31 December 1996.