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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Corporation Tax self-assessment (CTSA): the payment obligation: giving effect to carry-backs

When you give effect to an ACT carry-back claim COTAX requires you to specify the accounting period from which the relief is carried back.

When you give effect to a claim:

  • to carry back a trade loss or a non-trading deficit on loan relationships, or
  • record a SA or Taxpayer Amendment to a SA that gives effect to such a claim,

COTAX requires you to specify the accounting period from which the relief is carried back.

COTAX deals with carry-backs by:

  • debiting the ‘gross tax charge’ (that is, the tax charge that it calculates by disregarding the carry-back) to the company record, and
  • crediting the tax effect of the carry-back (that is, the difference between the ‘gross tax charge’ and the actual tax charge),

to the company record as if it were a payment made on the date from which the statute says the relief is to be effective for interest purposes.

When the carry-back is of surplus ACT, the ‘payment type’ credit posting will be the amount of ACT you have shown as carried back. When the carry-back is a trade loss or non-trading deficit, the ‘payment type’ posting will be the result of a computer calculation of the tax-effect of the relief.

Payment applications show the ‘gross tax charge’ as the tax charge. The relief will be shown as (or be included in) tax paid.

The purpose of handling carry-backs in this way is, of course, to enable the computer to calculate credit, late payment and repayment interest automatically and (in as many cases as possible) correctly.

COTAX cannot calculate interest automatically in any of the circumstances listed below.

  1. When there has already been a repayment of tax in consequence of a carry-back for the accounting period.
  2. When the carry-back displaces some other relief or reliefs which would have been due if the carry-back claim had not been made. (See CTM92220, Example 3, and CTM92253, CTM92254 and CTM92255.)
  3. When the carry-back is of surplus ACT, some or all of which has only become surplus because of the carry-back of a loss or deficit from a still later period.
  4. When the amount of a carry-back already recorded on the computer is amended.
  5. When the carry-back of a loss or non-trading deficit reduces the rate of liability from the full rate, with marginal small companies relief, to the small companies’ rate.
  6. When the carry-back is of a loss or non-trading deficit and results in marginal small companies relief being due (whether or not marginal small companies relief was previously due) and the amount of marginal small companies relief is not calculated by the computer.
  7. When more than one loss or deficit is carried back to the same accounting period.

See the On-line Company Tax Manual (COM), business area ‘claims/reliefs’ for more detail and how to handle claims involving any of the above complications.