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HMRC internal manual

Enquiry Manual

Concluding the Enquiry: Calculation of Duty Lost: Time Barred Claims - Companies

FA98/SCH18/PARA 61

FA98/SCH18/PARA 62

FA98/SCH18/PARA 63

FA98/SCH18/PARA 64

FA98/SCH18/PARA 65

FA98/SCH18/PARA 71


Under the legislation which existed before the introduction of CTSA, there were rules allowing companies to make and withdraw claims, elections, applications and notices outside normal time limits where the Revenue made certain assessments. These provisions are replicated as nearly as possible in Paragraphs 61 to 65. They deal with claims, etc which reduce the additional tax charged by certain assessments and amendments made by HMRC. Para 65, which applies to assessments made on the basis of careless or deliberate behaviour, is HMRC’s longstanding practice in investigation cases (in Section 36 TMA since 1989 EM3905) of giving all the reliefs the taxpayer could have claimed. For non-culpable liabilities, paras 62 to 64 go further, however, by covering ‘a claim, election, application or notice’ and not just ‘any relief or allowance’.

How do they work?

The key provisions are para 64, which ensures that the reduction in tax liability produced by action under these paragraphs shall not exceed the increase in liability that triggers the right to use them, and para 62(3), which specifies which liabilities may be reduced. The scheme of these paragraphs is thus to focus not on the particular assessment or AP, but on liability.

Take a company with a 31 December year end and assume that

  • a long-running enquiry on 1999 which also affects 2000 is concluded in October 2007, at which point returns have been filed up to 2006 and no other enquiries have been opened, and that
  • since the company fails to amend its self-assessment for 2000, you make an HMRC amendment under para 34(2)(b) which increases the liability by £1000.

Para 62(3) authorises the company to make/revoke/vary claims etc such as to reduce by no more than £1000 the liability for the APs ending 2000 to 2008. If it made (say) an additional capital allowances claim, it could only reduce its liability by £1000 and if that was achieved in 2000 it could not get any additional relief for the closed years 2001 to 2004.

Apart from the prohibition on withdrawing irrevocable claims, elections etc, a company is free to withdraw any claim, election etc that it has made and to make any claim, election it has not made, so long as its ‘making, giving, revocation or variation has or could have the effect of reducing a relevant liability of the company.’ [para 62(2)]. The effect is then restricted by para 64. In particular, the restriction in para 64(1) is to ‘any liability to tax’ without restriction to given accounting periods: once the company has recouped the additional liability it has been charged, the election or notice continues to be in force but its tax effect is disregarded. Whether the company will be able to revoke it and then make a new one will depend on the terms of its own legislation.

When do they apply?

They are triggered if you make

  • after an enquiry into one AP, an HMRC amendment to the self assessment on another AP, under para 34(2)(b) because the company does not make the amendment itself under para 34(1)(b)
  • a discovery assessment, or
  • an assessment to recover excess group relief, under para 76 because the company fails or it no longer able to amend its return.

Statement of Practice 5/01 sets out HMRC’s approach to late claims to group relief, losses and capital allowances under CTSA.