COM153064 - CT Pay and File: claims/reliefs: ACT: correcting interest, responsible CT office: Examples
Example 1
This example deals with the position when an amount of ACT carried back to an AP displaces another available relief, without resulting in a repayment from the COTAX record.
APE 31/03/9521
Date of event
| Event
| Consequence
| |
31/03/22
| Return
| Profits (Tax 25%) IT set off Payable
| 20,000 5,000 5,000 NIL
|
30/11/23
| Claim to carry back ACT from APE 31/03/9723
|
| 5,000
|
30/11/23
| Claim to repayment
|
|
|
01/02/24
| Repayment of IT
|
| 5,000
|
Legal Consequences
Section 87A (S87A) Taxes Management Act (TMA) 1970
No liability.
There is no charge to late payment interest on the CT liability, which was covered by Income Tax and is now covered by ACT carried back. If the carry-back claim had not been made there would still have been no CT liability.
S826(7A) Income and Corporation Taxes Act (ICTA) 1988
Due on 5,000 from 01/01/24 (the due date of the AP from which the ACT is carried back) to 01/02/24 (the date of repayment).
Procedure
If no assessment has been made when the company makes the claim to carry back ACT you can allow the ACT by making the assessment using function PAST (Prepare Full Assessment).
If the assessment has been made you can allow the ACT by amending the assessment using function PAST.
Please note that: Whether you make or amend the assessment you must amend the EDP of the carry-back. The computer will calculate the EDP of the ACT posting as 01/01/24 (the due date of the AP from which the ACT is carried back) and charge Section 87A interest from 01/10/23 to 01/01/24.
The computer sees the ACT posting as a payment made on 01/01/2024 against a liability of £5000 due on 01/01/2022. The correct EDP to enter on screen COT120M in function PAST is 01/01/22 (the date on which the displaced IT set-off is effective for interest purposes).
The repayment is of Income Tax, and so must be handled manually, together with the related repayment interest.
Example 2
This example deals with the position when a subsequent loss carry- back displaces an ACT set-off. The displaced ACT is itself carried back to a still earlier Accounting Period (AP).
APE 31/12/22
Date
| Event
| Consequence
|
01/10/23
| Payment
| £6,000
|
31/12/23
| Return and assessment Profits Tax (25%) ACT (of this AP)
|
£40,000 £10,000 £4,000
|
|
| £6,000
|
01/08/24
| Claim to carry back losses £40,000 from AP 01/01/24 to 30/06/24 Claim to repayment
|
|
| Claim to carry back surplus ACT of APE 31/12/21 to AP 01/01/20 to 31/12/20
|
|
1/9/24
| Amended assessment to Profits Losses c/b Tax
|
£40,000 £40,000 Nil
|
| Repayment of CT
| £6,000
|
| £4,000 surplus ACT carried back to APE 31/12/20
|
|
Legal consequences
Section 87A (S87A) Taxes Management Act (TMA) 1970
No liability.
Please Nnote that: There is no charge to late payment interest on the £4,000 liability originally covered by ACT and now covered by losses carried back. If the loss carry- back claim had not been made, the CT liability would have been £6,000, and that was paid on the due date.
S826 Income and Corporation Taxes Act (ICTA) 1988
Nonething is due, as repayment is made before the due date of the AP from which the loss is carried back (01/04/9724) (S826(7A) ICTA 1988).
Procedure
The computer would charge late payment interest on £4,000 previously covered by ACT and now by the loss from 01/10/22 (due date for the AP) to 01/04/24 (the due date of the losses AP).
You could correct this by changing the EDP of the loss carry-back posting on screen COT120M in function PAST (Prepare Full assessment) to 01/10/22. However, because the repayment interest is calculated by reference to the carry-back posting the computer would give repayment interest on the £6,000 repayment from 01/10/22 to the date when the repayment is made. So you need to handle the interest position manually as follows:
use function MAPS (Maintain AP Signals) to set the CII (Clerical Interest Indicator) signals
use function PAST to give effect to the loss carry- back by amending the assessment
use function DIRR (Direct Repayment) to repay the CT overpayment of £6,000. The computer will correctly add no RPI, as the repayment is made out of the carry- back posting, whose EDP is in the future
send form CT250(P) to HMRC Payments. Mark it to show no action is required, as no LPI or RPI is due
If the assessment could not be made when the carry- back claim was made on 01/08/23, but you were prepared to repay some of the CT under S10(3) ICTA 1988 you could:
use function RECB (Record Amounts Carried Back) to post a carry-back of the tax difference of £6,000
use function DIRR to repay the resulting overpayment. The computer would:
rightly add no RPI, as the repayment would be made out of the carry-back
automatically set the Clerical Interest Indicator
ACT Carry-Back
APE 31/12/9320
Date
| Event
| Consequence
|
01/10/21
| Payment
| £5,000
|
31/12/21
| Return and assessment Profits Tax (25%)
|
£20,000 £5,000
|
01/08/23
| Claim to carry-back ACT from APE 31/12/9421
|
£4,000
|
01/11/23
| Amended assessment Profits Tax (25%) ACT c / b
|
£20,000 £5,000 £4,000
|
|
| £1,000
|
| Repayment of CT
| £4,000
|
Legal consequences
S87A TMA 1970
Nothing is due. Full liability paid by the due date.
S826 ICTA 1988
Nothing is due. Repayment interest would only be payable from 01/04/24 (the due date of the AP from which the loss is carried back - (S826(7AA) ICTA 1988)) if the repayment is made after that date.
Procedure:
use function PAST (Prepare Full Assessment) to amend the assessment
amend the EDP of the carry- back to 01/04/24 (the due date of the AP in which the loss arose). The computer will calculate it as 01/10/22 (the due date of the AP from which the ACT is carried back) and pay repayment interest accordingly
As the repayment is made out of the carry- back posting, the computer automatically sets the CII (Clerical Interest Indicator).
If you could not make the assessment when the carry- back claim was made on 01/08/23, but you were prepared to make a provisional repayment under S10(3) ICTA 1988, you could:
use function RECB (Record Amounts Carried Back) to record the carry-back
amend the EDP to 01/04/24
use function DIRR (Direct Repayment) to make the repayment