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HMRC internal manual

COTAX Manual

HM Revenue & Customs
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CT Pay and File: claims / reliefs: ACT: ACT carry-back and late payment interest

For APs ending after 30 September 1993 S87A TMA 1970 applies to the late payment of CT.

Under S87A, interest is charged on CT from the date the tax becomes due and payable (nine months and one day after the end of the AP) until payment.

Effect of claim to carry back ACT on late payment interest

S87A(4) TMA 1970

Under S239(3) ICTA 1988 a company may claim to carry back all or part of its surplus ACT. It can treat it as ACT paid in respect of distributions made in APs beginning in the six previous years. You can find further guidance in the Corporation Tax Manual at CTM20170.

S87A(4) TMA 1970 recognises that any CT unpaid for the earlier AP receiving the set-off is reduced by a relief that originates later. It ensures that late payment interest continues to run until the due date for the later AP.

The legislation achieves this by:

  • identifying the amount of unpaid CT liability that would have been due without the ACT carry-back claim
  • charging S87A interest on that amount of unpaid liability, up to the due date of the AP from which the ACT is carried back.

Examples are provided to help illustrate these situations.

Example 1 (Word 30KB)

Concerns a case where ACT carried back meets an unpaid liability of an earlier AP. Interest is due on the amount covered by the ACT set-off. It is payable for the period from the due and payable date of the earlier AP, to the due and payable date of the AP from which the ACT was carried back.

Example 2 (Word 32KB)

Concerns a case where the company has paid the CT for the earlier AP in full before the carry-back. No interest is chargeable because the company paid the amount of the CT liability disregarding the ACT carry-back claim on the due date.

If the company had paid the CT for the earlier AP in full, but late, interest would be due from the due date to the date of payment. The ACT carry-back would attract no further interest in these circumstances.

Example 3 (Word 31KB)

The ACT carried back displaces a relief already given for the earlier AP because ACT takes precedence. This could be Income Tax or SC60 tax, for example. In these cases if you disregarded the ACT carry-back claim there would be no CT liability because the displaced relief would have covered it. Consequently no liability to late payment interest arises in these circumstances.

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Late Payment Interest - Carry back to pre CT Pay and File AP

If ACT is carried back to an earlier period before the start of CT Pay and File then the interest provisions of S157 FA 1989 apply.

It ensures that late payment interest is charged to the due date of the AP from which the ACT was carried back. For more information see Company Tax Manual at CTM20170.

See COM153021 for legislation applying to this subject,.