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HMRC internal manual

COTAX Manual

Claims / reliefs: CTSA claims frameworks: introduction

The rules that apply to claims for CTSA APs are in Parts II and VII Sch.18 FA 1998 and fall within the ‘process now, check later’ principles governing CTSA.

For specific information about:

  • group relief and capital allowances, see the Company Taxation Manual at CTM97002 onwards and CTM98005 onwards
  • the rules that apply to claims under Section 458 CTA 2010 (formerly ICTA88/S419(4)), see CTM98205.

Wherever possible, companies must make claims by including them in their company tax returns (or by amendment of the return) and by giving effect to them in their self assessments.

A claim included in a return is subject to the same ‘process now, check later’ procedures as any other entry in the return. For example, HMRC has the right to correct obvious errors in the claim and may enquire into the validity and accuracy of a claim.

In some cases, it is not possible for a claim or election to be dealt with in a company tax return. This may be, for example, because a claim affects an AP for which the company is no longer able to amend its return, or because an election has effect not just for one AP but until further notice. In such cases, Schedule 1A TMA 1970 (Claims and Elections not included in returns) provides for such claims to be given effect by HMRC by discharge or repayment of tax and a parallel set of ‘process now, check later’ rules for dealing with these claims, providing for them to be corrected, enquired into and become final.

All claims for a relief, an allowance or a repayment of tax must be quantified at the time the claim is made. ‘Quantified’ means that the claim must be expressed in figures. Formulaic claims are not allowed.

Many elections are not capable of immediate quantification, are not tied to specific APs, take effect from a particular date and remain in force until revoked.

If a company discovers that it has made a mistake in a claim or election, it may make a supplementary claim or election within the time allowed for making the original one.

The rules deal with claims and elections in three categories as follows. See:

  • COM52010 for claims and elections affecting one AP
  • COM52020 for claims and elections involving more than one AP
  • COM52030 for claims and elections not made in a return.

There are special rules for claims to group relief and to capital allowances. Such claims can only be made in a return, either when the return is first made or by amendment, never under Sch.1A TMA 1970.

Certain other specific types of claim cannot be made before the return is delivered. These are:

  • claims for repayment of income tax
  • most claims to payment of tax credit (for as long as this is available)
  • claims for relief under the corporate venturing scheme.

A company can amend its return to make a claim during the course of an enquiry into that return, but any consequent reduction in the tax liability or change to the amount of group relief surrendered does not take effect until the enquiry is concluded. However, the normal time limit for making a claim is not extended because an enquiry is in progress.

For detailed information about the legal background to claims, see the Company Taxation Manual (CTM) at CTM90602 onwards.

You use the Process a Claim option in function RAMA (Record / Amend Assessment) to record the effect on the tax liability of claims which are not already taken into account in an original or amended self assessment. When you use this option, COTAX:

  • issues a claim acknowledgement to the company, with a payslip attached if there is any outstanding liability for the AP
  • deals with any overpayment which results from the claim, by reallocating money to any outstanding liability on the COTAX record and repaying any balance or putting the overpayment on either the Overpayments Review List (LOPU) or Overpayments List (LOPD) if it cannot handle it automatically.

If the claim affects the tax base for the penalty, COTAX also prompts you to allow the automatic issue of a revised tax-related penalty determination or use function PPEN (Prepare Penalty Determination) to issue it manually. It makes an entry on the Penalties Requiring Review List (PENR) and removes it when the automatic process takes place or you use function PPEN.

Note that you only use the Process a Claim option when the claim is under Schedule 1A TMA 1970. Otherwise you use the Record a Self Assessment or Record a Taxpayer Amendment option as appropriate.