COM50080 - Claims/reliefs: loss and non-trading deficits carry-back: changing the EDP
The COTAX calculated effective date of payment (EDP) ( See Glossary) of a loss or non-trading deficit carry-back posting produces the wrong result for interest purposes when:
- a carry-back has already caused a repayment or reallocation for the Accounting Period (AP)
- there has already been a repayment or reallocation for the AP as a result of a carry-back and you amend the amount of the carry-back
- the carry-back results in the displacement of another relief or set-off that you would have allowed if the company had not made the carry-back claim
- a loss carry-back reduces the rate of liability from the full CT rate to the Small Profits Rate (SPR)
- there is a loss carry-back and the caseworker has overwritten the computer calculated Marginal Relief (MR) figure
- in the case of a loss carry-back, tax is chargeable other than at the SPR that are below Lower Relevant Maximum Amount (LRMA) (for example a close investment holding company)
- there is more than one loss carried back and you need to alter the order in which the computer processes trading losses
You must recognise such cases and intervene by correcting the EDP where that is possible or request that the HMRC Payments Operations team calculate the interest manually where it is not possible. See COM50090 for more information.
Correcting the Effective Date of Payment (EDP)
When you make or amend an assessment using function RAMA (Record/Amend Assessment), you can over-ride the COTAX calculated EDP and enter a non-standard EDP where appropriate.
You can only correct the interest position by correcting the EDP when giving effect to a carry-back that only displaces some other relief or set-off, and so does not itself satisfy any outstanding liability to CT. COM50085 Example 1 illustrates such a case.
It is not possible to correct the interest position by amending the EDP if you cannot give the carry-back posting a single correct EDP. COM50085 Example 2 illustrates such a case.
When it is not possible to correct the EDP, you must intervene by setting the clerical interest indicator (CII), see COM95015 if it is not set already.
When you have amended the assessment following the setting of CII, you have to make any repayment using function DIRR (Direct Repayment). In these cases, you also need to send an eForm to GBP Payments Operations to advise them of the interest consequence of the carry-back; for further details, see COM129000.
Unable To Calculate Interest Correctly On A Carry-Back
COTAX is unable to calculate interest correctly on carry-backs where:
A repayment or reallocation has been made as the result of a previous carry-back
Carry-back relief results in displacement of another relief or set-off relief
Surplus ACT is carried back following the carry-back of a trading loss
An amount of a carry-back is subsequently amended
A loss carry-back reduces the rate of liability from the full CT rate to the small companies rate
There is a loss carry-back and the caseworker has overwritten,COTAX calculated Marginal Small Companies Relief (MSCR) figure
In the case of a loss carry-back, tax is chargeable other than at the small company's rate on profits that are below Lower Relevant Maximum Amount (LRMA) (for example a close investment holding company)
There is more than one loss carried back and you need to alter the order in which the computer processes trading losses – see Note below
Note:
Where more than one loss is carried back the computer applies the following order of processing to ensure the correct tax effect is calculated
Losses from an earlier Accounting Period (AP) have precedence over losses from a later AP
Where both a trade loss and a non-trading deficit are carried back for the same AP, the trade loss has precedence
You can change the order in which the computer processes losses by using Function PAST (Prepare Full Assessment).
See: