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HMRC internal manual

Self Assessment Manual

From
HM Revenue & Customs
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Repayments: claims made outside a return: claims: involving two or more years

The rules governing claims which involve two or more years are contained in Section 42 and Schedule 1B TMA 1970. These claims relate to

  • Loss relief carried back (including capital losses)
  • Carry back of pension contributions
  • Farmers’ averaging
  • Carry back of post-cessation receipts
  • Literary and artistic spreading

Note: In the case of farmers’ averaging, carry back of post-cessation receipts and literary and artistic spreading, the claim must be made in the return or by amendment to the return.

Whether relief is to be given by set-off or repayment, a freestanding credit will be created on the SA record to give effect to the claim.

Freestanding credits will have to be created clerically in most cases, but freestanding credits will be created automatically by the SA system for Schedule 1B carry back claims within an individuals’ 1st version of their tax return for 2001-2002 or later years.

For set off’s the EDP of the freestanding credit will be the later of 

  • The date the taxpayer made the valid claim to the relief

Or

  • The relevant due date of the charge against which the relief is to be set

For repayments, the EDP will be the statutory filing date of the later years’ return.

Note: Freestanding credits created automatically will show an EDP of the date of the claim. RPS will only be given from the later of the date of the claim and the fixed filing date of the later years’ return. Examples involving the creation of automatic freestanding credits can be found in subject ‘Automatic Freestanding Credits’ (SAM110010)

Detailed advice on creating a clerical Freestanding Credit is provided in subject ‘Freestanding Credits’ (SAM110080).

Claims to carry back losses and pension contributions can be made outside the return. In this context, ‘losses’ include not only losses incurred in business but also certain types of CGT losses which can be carried back. These are

  • Carry back of capital gains losses on death (S62 TCGA 1992)
  • Carry back of capital gains losses arising on the termination of mineral leases (S202 TCGA 1992)
  • Losses on unquoted shares in trading companies (S574 ICTA 1988). This is a relieving provision for capital gains losses against income

Time limits for original claims and elections

There are special time limits governing some claims and elections which relate to two or more years of assessment

  • A claim to relief in respect of trading losses, and any election to carry back loss relief to an earlier year, must be made within 1 year 10 months of the end of the year in which the loss was incurred (S380 / 381 ICTA 1988)
  • A claim to relief against income for losses on unquoted shares in trading companies under S574 ICTA 1988 must be made within 1 year 10 months of the end of the year of assessment in which the loss was incurred
  • An election to carry back personal pension contributions must be made to the Pension Scheme Administrator on or before the time of payment but before 31 January within the income tax year when the contributions were actually paid (S641A ICTA 1988). (The option to carry back personal pension contributions does not apply to contributions paid in 2006-2007 and subsequent years)
  • A claim to farmers’ averaging must be made within 1 year 10 months of the end of the later year of assessment (S96(8) ICTA 1988). However, where a claim to farmers’ averaging has been made and the profits subsequently change for any reason, S96(5)(c) ICTA 1988 treats the original claim as not having been made and gives a fresh opportunity to claim up to 31 January next following the end of the year in which the adjustment is made
  • A claim to carry back post-cessation receipts must be made within 1 year 10 months of the end of the year in which the sum was received (S108 ICTA 1988)
  • Claims to artistic and literary spreading must be made within 1 year 10 months of the end of the later year of assessment (S534(5A) / S537A(5A) / S538(4) ICTA 1988)

All other claims and elections within Schedule 1B have the general time limit of 4 years from the end of the later year.

Further information on time limits for original claims and amendments to those claims is provided in subject ‘Claims: Time limits for claims and amendments to claims’ (SAM114080).