COM153074 - CT Pay and File: claims/reliefs: ACT: clerical interest indicator, Example 1

Example 1  

This example deals with a case where an ACT carry- back displaces a set-off or relief otherwise available for the Accounting Period (AP). 

The carry- back is only partially utilised in displacing the earlier set-off or relief, and results in a repayment from the CTPF record. 

The example deals with a carry- back of ACT that displaces a set-off of Income Tax. The principles would apply equally to ACT carried back which displaces a set-off of SC60 tax or DTR. 

APE 31/12/21 

Date 

 

Event 

 

Consequence 

 

01/10/22 

 

Payment 

 

£2,000 

 

31/12/22 

 

Return and assessment 

Profits 

Tax (25%) 

IT set off 

 

 

£20,000 

£5,000 

£3,000 

 

01/09/23 

 

Claim to carry back ACT from APE 31/12/22 

Claim to repayment 

 

£4,000 

 

01/12/23 

 

Amended assessment 

Profits 

Tax 

 

 

£10,000 

£5,000 

 

 

ACT c / b (displacing IT of £2,000) 

 

Amended IT set-off 

Tax 

 

£4,000 

 

 

£1,000 

NIL 

 

01/12/23 

 

Repayment of CT 

 

£2,000 

 

01/12/23 

 

Repayment of IT 

 

£2,000 

 

 

Legal consequences 

S87A TMA 1970 

No liability.  There is no charge to late payment interest on the £2,000 of the CT liability which was covered by Income Tax and is now covered by ACT carried back.  The CT liability, ignoring the carry- back claim, is £2,000 and that amount was paid on the due date. 

S826 ICTA 1988 

Due on £4,000 (CT plus IT) from 01/10/23 (the due date of the AP from which the ACT has been carried back) to 01/12/23 (the date of repayment) (S826(7) ICTA 1988). 

Procedure 

The computer would charge late payment interest (LPI) on £2,000 (the amount of IT displaced by the ACT carry- back) from 01/10/22 to 01/10/23 (the due date of the AP from which the ACT derives).  This is wrong, as the £2,000 was originally covered by the now displaced IT set-off. 

You could correct this by changing the EDP of the carry- back to 01/10/22, that would cause the computer to miscalculate repayment interest (RPI) on the CT repayment.  It would add RPI from 01/10/22 rather than 01/10/23 because the repayment is made by reference to the carry- back posting.  You need to handle the interest position manually by: 

  • using function MAPS (Maintain AP Signals) to set the Clerical Interest Indicator (CII) 

  • using function PAST (Prepare Full Assessment) to give effect to the claim by amending the assessment 

  • using function DIRR (Direct Repayment) to repay the CT overpayment and RPI (the computer will calculate RPI correctly, as you have not changed the EDP) 

  • repaying the £2,000 IT manually, together with RPI on it from 01/10/22 (due date of AP) to the date when the repayment is made