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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 - repayment interest

A claim to carry back a trading loss (CTA2010/S37) or a non-trading deficit on loan relationships (CTA2010/S459 (1)(b) may cause a repayment of CT or Income Tax for the earlier accounting period.

In such circumstances ICTA88/S826 (7A) and (7C) provide that repayment interest runs only from the normal due date for the accounting period in which the loss or deficit is incurred - see Example 1.

This does not, however, apply in the case of a trading loss that is carried back to an accounting period falling wholly within the twelve months preceding the period in which the loss is incurred - see Example 2.

Example 1

Accounting period 01/04/2008 to 31/03/2009 Accounting period 01/04/2009 to 31/03/2010
CT liability (@ 28%) £50,000 paid on due date 01/01/2010 Non-trading deficit £40,000
(Profits include non-trading profits and gains on loan relationships of £100,000) Claim under CTA2010/S459 (1)(b) to carry deficit back to accounting period ended 31/03/2009

As a result of the carry-back tax of £11,200 is repayable. A repayment for this is issued on 26/01/2011. The repayment carries repayment interest from 01/01/2011, the normal CT due date for the accounting period ended 31/03/2010.

Example 2

Accounting period 01/04/2008 to 31/03/2009 Accounting period 01/04/2009 to 31/03/2010
Liability (@ 28%) £50,000 paid on due date 01/01/2010 Trade loss £40,000. CTA2010/S37 claim to carry back to accounting period ended 31/03/2009
£11,200 repaid on 26/01/2011  

The repayment carries repayment interest from 01/01/2010, the normal CT due date for the earlier accounting period. This is because the relief is for a trading loss carried back to a period falling wholly within the twelve months preceding the accounting period of loss.