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HMRC internal manual

COTAX Manual

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HM Revenue & Customs
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Repayments / reallocations: non automatic reallocations: reallocation into COTAX - responsible CT office

This subject is presented as follows.

General

DSET codes

Set off an interest bearing amount against COTAX
Set off interest against COTAX
Set off of R&D Tax Credit, Film Tax Credit, Television Tax Credit and Video Games Tax Credit
Set off a SAFE repayment against COTAX

General

Where you have a credit that needs to be set off against a COTAX AP, you should use function DSET (District Set Off) to create the relevant posting on the AP record(s). Details of each set off are passed to OAS.

You need to use function DSET (District Set Off) to do one of the following.

  • Create a credit posting (such as Research & Development).
  • Set off an interest bearing amount against a COTAX liability.
  • Set off interest against a COTAX liability.

You should not use DSET to set off an overpayment arising on a SAFE record, including CT61 charges, against COTAX. The DMB Miscellaneous Charges unit in Shipley will reallocate or repay an overpaid charge. See COM23132 for further guidance.

Depending on the circumstances of the case, using DSET may do one or more of the following.

  • Satisfy an existing liability for the AP on which you have made the set off.
  • Create a reallocation to cover unpaid liabilities on other APs.
  • Create an overpayment.

COTAX treats the amount you set off using DSET as a payment made:

  • for the AP you set it off against
  • on the EDP (Word 41KB) that you enter, but note that The EDP for R&D Credit, Film Tax Credit, Television Tax Credit and Video Games Tax Credit varies depending on how the credit will be utilised.

The EDP you enter must be the date from which the company should be given credit for the set off for interest purposes.

You cannot undo a DSET posting once you have made one. You must get it right first time. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

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DSET codes

You can select from the following codes when using function DSET. Several of them are rarely appropriate as they apply only to CT Pay and File APs.

50900 CT / ACT for a pre-Pay & File AP. Select this entry when you are setting off an overpayment of Corporation Tax or Advanced Corporation Tax, for an AP that ended before 1 October 1993.

50902 CT / ACT for a pre-Pay & File AP (Northern Ireland). Select this entry if you are in Northern Ireland setting off an overpayment of Corporation Tax or Advanced Corporation Tax, for an AP that ended before 1 October 1993.

50880 ACT for a Pay & File AP. Select this entry when you are setting off an overpayment of Advanced Corporation Tax for an AP that ended after 1 October 1993. It is not appropriate for a repayment that has been created by an ACT carry-back.

50770 S419(4) ICTA 88. Select this entry when you are setting off an overpayment of Section 419 ICTA 1988 or a repayment of Section 419 tax that has arisen as a result of giving relief under Section 419 (4) ICTA 1988 for an AP that ended before 1 July 1999.

50775 IT Deducted at Source. Select this entry when you are setting off an overpayment of income tax deducted at source which is not within the other types in the list.

50888 Research & Development Tax Credit. Select this entry when you are setting off an overpayment of Research and Development Tax Credit.

50889 Land Remediation Tax Credit. Select this entry when you are setting off an overpayment of Land Remediation Tax Credit.

50774 Construction Industry Scheme (CIS25/SC60). Select this entry when you are setting off an overpayment of SC60 or CIS25 tax.

50773 Penalties. Select this entry when you are setting off an overpayment on a penalty charge that is not recorded on COTAX. Do not use this function to set off an overpayment on a CT penalty for an AP ending on or after 1 October1993. Use function REWD (Direct Reallocation Within COTAX) instead.

50771 Repayment Supplement. Select this entry when you are setting off an overpayment of repayment supplement.

50881 Repayment Interest. Select this entry when you are setting off an overpayment of repayment interest that is not recorded on COTAX. If the repayment interest is recorded on COTAX, use unction REWD (Direct Reallocation Within COTAX) instead.

50901 Late payment interest on Corporation Tax. Select this entry when you are setting off an overpayment of late payment interest other than late payment interest on Income Tax or ACT, that is not recorded on COTAX. If the late payment interest is recorded on COTAX, use function REWD (Direct Reallocation Within COTAX) instead.

50772 Late payment interest on Income Tax or ACT. Select this entry when you are setting off an overpayment of late payment interest on Income Tax or ACT.

51049 Petroleum Revenue Tax. Select this entry when you are setting off an overpayment of Petroleum Revenue Tax only when you are in an Oil Taxation Office.

51069 Advance Petroleum Revenue Tax. Select this entry when you are setting off an overpayment of Advance Petroleum Revenue Tax only when you are in an Oil Taxation Office.

50999 Film Tax Relief. Select this entry when you are setting off Film Tax Relief.

Set off an interest bearing amount against COTAX

When you use function DSET the table below shows you what EDP to use when setting off the following interest bearing types of duty into COTAX.

Types of duty CT Pay & File APs CTSA APs
     
IT deducted at source. Nine months and one day after end of the AP. The day after the end of the AP.
Tax credits. Not applicable. The later of the statutory filing date or the date the return is delivered, but see below for further details.
Research & Development Tax Credit.    
Note: This does not include R&D Expenditure credits, which do not attract interest. Not applicable. The later of the statutory filing date or the date the return is delivered, but see below for further details.  
  Land Remediation Tax Credit. Not applicable. The later of the statutory filing date or the date the return is delivered.
  Construction Industry Scheme (CIS25 / SC60) for deductions up to 6 April 2002. Nine months and one day after the end of the AP. Nine months and one day after the end of the AP.
  Construction Industry Scheme for set offs after 6 April 2002. The date of the agreement to the set off. The date of the agreement to the set off.

See CTSA material dates (Word 112KB) for full details on all types of tax credits.

For these types of duty, select ‘N’ for the ALLOCATE TO DUTY TYPES AUTOMATICALLY field and then allocate the set off to tax. This allows COTAX to calculate any repayment interest due.

See COM125094 for the relevant action guide.

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Set off interest against COTAX

When you use function DSET to set off interest, the EDP is the date the set off is made for:

  • repayment interest
  • repayment supplement
  • late payment interest on CT
  • late payment interest on IT or ACT.

For these set offs, select ‘N’ for the ALLOCATE TO DUTY TYPES AUTOMATICALLY field and then allocate the set off to interest. You need to do that to prevent COTAX calculating repayment interest when it is not due, as the payment type is not Corporation Tax.

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Set off of R&D Tax Credit, Film Tax Credit, Television Tax Credit and Video Games Tax Credit

Under s826 ICTA88, companies are not entitled to repayment interest on any of the above credits before the later of the statutory filing date or the date the return claiming the credit is delivered. As a result, the credit is posted onto COTAX with an EDP equivalent to the later of those dates to ensure erroneous or excessive repayment interest is not paid.

This does not mean a company cannot receive the credit before that EDP, just that it isn’t entitled to any repayment interest before then.

For example, where APE 31 December 2012.

  • Statutory filing date 31 December 2013.
  • Return e-filed 7 October 2013.
  • Claim for Film Tax Credit of £10,000.

The EDP to enter on DSET is 31 December 2013. The sum of £10,000 repaid on 12 October 2013 has no repayment interest added because it is repaid before the EDP used for s826 purposes.

However, where the credit is set off against another CT liability of the same AP, using the s826 EDP could result in COTAX calculating late payment interest beyond the date on which the company could otherwise have received a repayment. Using the above example and assuming the company is not large for the purposes of the instalment regulations:

  • Film Tax Credit claim for £10,000 and
  • s455 tax due £12,000.

The EDP to enter on DSET is 1 October 2013, that is the normal due date (NDD). There is no repayment interest as all the credit is being used to cover a sum due at 1 October 2013. If the s826 EDP of 31 December 2013 was used, the company would be charged late payment interest for 3 months on £10,000 of the s455 tax due, whereas if it had received a repayment it could have paid the s455 tax.

You must remember that the earlier EDP only applies to credits that are used to set off against a CT liability of the same AP. So, if the Film Tax Credit claim is for £10,000 and the s455 tax due is £5,000, the EDP to enter on DSET is:

  • 1 October 2013 for £5,000 and
  • 31 December 2013 for the balance of £5,000.

You must use the date that the return claiming the credit is delivered as the EDP where:

  • the company is large and liable to pay by instalments for the AP and
  • you are setting off a credit against other CT due for that AP.

This is because debit interest accrues earlier than the NDD.

You must ensure that this date is only used for set offs. Where some of the credit is repayable you should still use the s826 EDP on that part, to prevent the company accruing credit interest to which it is not entitled.

Where any credit is to be set off against an outstanding CT liability on an earlier AP:

  • first, use function DSET to enter the credit on the AP of the claim, using the date that the return claiming the credit is delivered as the EDP
  • then, reallocate against the earlier AP using the same EDP.

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Set off a SAFE repayment against COTAX

Where you have an overpayment on SAFE or in respect of a CTA charge that has been archived and is being reduced, for the same AP the EDP is the normal due date (9 months and 1 day after the end of the AP).

For other APs, the EDP is the date on which the amount of the repayment is agreed - this is the amount of tax and any interest payable as calculated manually or refer to COM80200 to see the common period rules.

You must not use DSET to set off the overpayment, including CT61 charges, against COTAX.

See COM23132 for more information.

You need to complete a SAFE Repayments stencil (SAFE 1) and give it to your SAFE user who will set the ‘No Repayment’ signal on SAFE if necessary and send the form to the Miscellaneous Charges unit in Shipley. You can get the SAFE 1 stencil at Excel > SEES > Forms and Letters > category ‘SAFE’.

You should complete the stencil and enter ‘Repayment Set off’ in the space given to provide the reason for your repayment. In the same space, give full details of the reason and if appropriate details of any repayment supplement or interest that is due including the ‘from’ and ‘to’ dates for all non S455 CTA 2010 charges.

There is a separate section for you to complete where repayment interest is due for S455 charges. Where repayment interest is due you also need to supply the ‘to’ date so the Miscellaneous Charges unit can correctly calculate the interest due on the set off.

In the ‘Repayment Nominee’ box, enter the UTR, AP number and duty type where the overpayment is to be allocated.

The Miscellaneous Charges unit will arrange to reallocate the overpayment to the COTAX charge using OAS.

See Relief Instruction (RE) Manual at RE3195 regarding the calculation of repayment supplement for a pre-COTAX AP.

Notes:

1. A payment type posting is recorded in VPPD (View Payment and Posting Details) when you use DSET and cannot be undone. You must use DSET carefully to ensure correct details are used. (This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
   
2. You should use function DSET when you review the cases entered on the MRPL (Manual Repayments List).
3. There are genuine risks in making manual repayments outside of COTAX and you must ensure that COTAX is updated to accurately reflect manual repayments.

See:

  • COM122011 for a list of forms relevant to this subject
  • COM122012 for a list of functions to use in particular situations
  • COM122013 for legislation applying to this subject.