COM153075 - CT Pay and File: claims/reliefs: ACT: clerical interest indicator, Example 2

Example 2  

This example deals with a case where an amount is unpaid and then covered by an ACT carry- back, which is later displaced by a claim to carry back losses.  The loss carry- back amount exceeds the ACT set-off it displaces, complicating the interest position.  The accounts are under enquiry, so no assessment is made until after 01/04/23. 

APE 31/12/20 

 

Date 

 

Event 

 

Consequence 

 

01/10/21 

 

Payment 

 

£4,000 

 

31/12/21 

 

Return  

at 25% 

 

£40,000 

£10,000 

 

01/09/22 

 

Claim to carry back surplus ACT from APE 31/12/21 

 

 

£6,000 

 

01/03/23 

 

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

 

£40,000 

 

 

01/09/22 claim to carry back ACT is fully displaced 

 

 

 

Claim to repayment under S10(3 ICTA 1988) 

 

 

01/04/23 

 

Repayment 

 

£4,000 

 

 

Legal consequences 

S87A TMA 1970 

There is no liability on the £4,000 paid on the due date.  When the balance of £6,000 is met by the ACT carry- back, late payment interest (LPI) is due from 01/10/21 (the due date) to 01/10/22 (the due date of the AP from which the ACT is carried back). 

The loss carry- back displaces the ACT carry-back.  Section 87A(6) preserves the existing interest charge, but does not extend it because if the loss did not exist, the liability would be covered by the ACT carry- back. 

S826 ICTA 1988 

Would run from 01/10/23, but repayment is made before that date, so no repayment interest is payable in this example. 

Procedure 

01/09/22 Claim 

Deal with the ACT carry-back by using function RECB (Record Amounts Carried Back) to prevent pursuit action for the unpaid liability of £6,000.  The computer will handle the interest consequences automatically, correctly calculating the EDP of the carry- back as 01/10/22.  It will not set the Clerical Interest Indicator CII as no repayment arises. 

If the accounts were not still under discussion, you could instead make an assessment using function PAST (Prepare Full Assessment). 

01/03/23 Claim: 

  • use function RECB (Record Amounts Carried Back) to post the tax effect of the carry- back.  The amount to post is £4000 (that part of the gross liability not met by the earlier ACT carry- back, had the loss carry- back not been claimed) 

  • use function DIRR (Direct Repayment) to make the repayment.  The computer will correctly add no RPI, as the repayment is made before 01/10/23, and set the CII signal (as the repayment is made out of the carry- back posting) 

Please note that:  When the assessment is eventually made, you must make sure the CII signal is set first.  You would have to do this using Ffunction MAPS (Maintain AP Signals) if the computer had not already set it automatically.  It would not be set if no repayment / reallocation had been made following either previous carry- back. 

The computer cannot handle the interest consequences automatically, and neither can you correct the position by changing the EDP of the loss carry- back, as it is only partially used up in displacing the ACT carry- back.