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HMRC internal manual

Compliance Handbook

Calculating the Penalty: Potential lost revenue Corporation Tax Group Relief or S458 CTA10: Example of S458(4) & (5) not ignored for PLR - inaccurate claim exception

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.

A company made a loan to a participator in the accounting period ended 31 December 2007 that was repaid on the last day of the accounting period ended 31 December 2010. The company claims that Section 458 relief of £3,000 is due on 1 October 2011 by virtue of Section 458(4) & (5).

An enquiry concludes that the company is not due a repayment and the error was through the company’s carelessness.

Paragraph 5(1) of Schedule 24 FA 2007 says that the potential lost revenue (PLR) is the additional amount due or payable in respect of tax as a result of correcting the inaccuracy. Paragraph 5(2) of that Schedule says that the additional amount due and payable includes an amount erroneously repaid and a repayment that would have been repaid if the inaccuracy had not been corrected.

If, in accordance with paragraph 5(4)(b) of that Schedule, the deferral under Section 458(4) & (5) was ignored when calculating the PLR, then the PLR would be nil. To ensure the PLR is calculated correctly in these types of cases the final sentence in paragraph 5(4)(b) says ‘(but this sub-paragraph does not prevent a penalty being charged in respect of an inaccurate claim for relief)’.

So, in this example, the PLR is the relief that the company expected under Section 458 of £3,000.