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HMRC internal manual

Compliance Handbook

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Calculating the Penalty: Potential lost revenue Corporation Tax Group Relief or S458 CTA10: Example of S458 ignored for PLR

This guidance applies to returns and documents with a filing date on or after 1 April 2009 where the return covers a tax period beginning on or after 1 April 2008 see CH81011 for full details.

Example 1

An enquiry into Company A’s return found a carelessly inaccurate Section 455 liability. The return showed a Section 455 liability of £3,000 that was relieved under Section 458 due to the loans being repaid before the normal due date. However the enquiry identified additional loans to participators that resulted in a total Section 455 liability of £5,000.

Of the £5,000 liability, only loans equating to £3,000 of liability had been repaid by the normal due date to give Section 458 relief due in the accounting period. The remaining loans were repaid later, giving rise to relief to which Section 458(4) & (5) apply.

Paragraph 5(4)(b) provides that the relief deferred under Section 458(4) & (5) is ignored when calculating the PLR, but the relief under Section 458(1) to (3) due in the accounting period is taken into account.

In this example the PLR is £5,000 - £3,000 (relief under Section 458(1) to (3) = PLR of £2,000.

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Example 2

An enquiry into Company A’s return found a carelessly inaccurate Section 455 liability. The return showed a Section 455 liability of £3,000 that was relieved under Section 458(1) to (3) due to the loan accounts having been returned to a credit position of £500 by the normal due date. However the enquiry identified additional loans to participators that resulted in a total Section 455 liability of £5,000 and a loan account that remained £1500 overdrawn at the normal due date.

HMRC amendment of the return increases the Section 455 liability by £2000 and the Section 458(1) to (3) relief by £500.

Therefore, in this example, the PLR is £1,500 - being the additional tax payable as a result of correcting the inaccuracy in the return. If any of the balance overdrawn at the normal due date has subsequently been repaid, the resultant Section 458(1) to (3) relief deferred under Section 455(4) & (5) is ignored.