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HMRC internal manual

Company Taxation Manual

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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 (ICTA88/S393A) or a non-trading deficit on loan relationships (FA96/S83 (2)(c)) may cause a repayment of CT or IT 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 1.4.98 to 31.3.99 Accounting period 1.4.99 to 31.3.00
   
CT liability (@ 31%) £50,000 paid on due date 1 January 2000 Non-trading deficit £40,000
(Profits include non-trading profits and gains on loan relationships of £100,000) Claim under FA96/S83 (2)(c) to carry deficit back to accounting period ended 31.03.99

As a result of the carry-back tax of £12,400 is repayable. A payable order for this is issued on 26 January 2001. The repayment carries repayment interest from 1 January 2001, the normal CT due date for the accounting period ended 31 March 2000.

Example 2

Accounting period 1.4.98 to 31.3.99 Accounting period 1.4.99 to 31.3.00
   
Liability (@ 31%) £50,000 paid on due date 1 January 2000 Trade loss £40,000. ICTA88/S393A claim to carry back to accounting period ended 31.03.99
£12,400 repaid on 26 January 2001  

The repayment carries repayment interest from 1 January 2000, 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.