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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Calculating the penalty: Losses impact on potential lost revenue calculation: Later returns become due

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

Another document such as a return may be due to be given to HMRC when the amount of a loss recorded in an earlier document is under review but before we have established whether any portion of the loss has been wrongly recorded.

Where a person can choose whether to claim relief for the loss under review when making a return for a later period, they need to decide whether to make a claim and in what amount. There are, however, situations where relief for unused losses carried forward is automatic, that is, there is no choice about how the relief is used and no claim is needed. For example, unused trade losses of a company carried forward must be set against the profits from the same trade in the following accounting period(s).

If the amount of loss included in the later return turns out to be excessive because of a careless or deliberate inaccuracy in an earlier return, the tax reduction achieved by the excess claim will be part of the potential lost revenue (PLR) in respect of that inaccuracy.

If you need to make an HMRC determination because the person has not sent a return to us, you will need to consider the amount of any loss under review in arriving at the amounts to include in the determination.

You should make the determination to the best of your information and belief and once you have a figure, contact Debt Management and Banking to raise the determination, see EM2027.

This will include reaching a decision on the amount, if any, of the loss under review that you believe must be set off against the person’s profits and gains.

You should aim not to set off (that is, use) any loss that might increase any eventual PLR.