SolvedCOM50022 | Claims/reliefs: loss and non-trading deficits carry-back: loss carry-back/late payment interest examples
From HM Revenue & Customs · COTAX Manual
Example 1
| AP 01/04/2019 to 31/03/2020 | AP 01/04/2021 to 31/03/2022 |
| Agreed and assessed CT liability of £20,000 | Trade loss £20,000 (Tax effect £4,000) |
| Paid £16,000 on the due date, 01/01/2021 (£4,000 unpaid) | Claims under Corporation Tax Act (CTA)2010/S37, as extended by Finance Act (FA)2009/Schedule 6 to carry it back against CT profits of the 2020 AP (Note 3) |
Liability for the Accounting Period (AP) 01/04/2019 to 31/03/2020 reduced to £16,000.
Interest on £4,000 (the amount unpaid before the loss carryback claim was made) is due for the period 01/01/2021 to 01/01/2023, which is the due date of the AP from which the losses were carried back.
In this example assume AP 01/04/2020 to 31/03/2021 had a loss which was surrendered as group relief.
Example 2
| AP 01/04/2019 to 31/03/2020 | AP 01/04/2021 to 31/03/2022 |
| Agreed and assessed CT liability of £20,000 | Trade loss £20,000 (Tax effect £4,000) |
| Paid £20,000 on the due date 01/01/2021 | Claims under Corporation Tax Act (CTA)2010/S37, as extended by Finance Act (FA)2009/Schedule 6 to carry it back against CT profits of the 2020 AP (Note 3) |
Liability for APE 31/03/2020 reduced to £16,000.
£4,000 tax is repaid on 01/10/2022.
In this example assume AP 01/04/2020 to 31/03/2021 had a loss which was surrendered as group relief.
No late payment interest is due because £20,000, the amount of CT liability disregarding the loss carry-back claim, was paid.
If the company had paid the £20,000 late, S87A interest would have been payable from the due date of the 2020 AP until the date of payment. Further interest to 01/01/2023 would not be due on the £4,000 covered by the loss carry-back. S87A is only concerned with tax unpaid at the time of the carry-back.
See COM50040 for an example of how COTAX treats the S826 repayment interest on the sum to be repaid.
Example 3
In this example the interest calculation is performed after allowing for reliefs that have been displaced by the carry-back.
| AP 01/04/2019 to 31/03/2020 | AP 01/04/2021 to 31/03/2022 |
| Agreed and assessed liability of CT £20,000 less IT suffered £20,000 net nil | Trade loss £20,000 (Tax effect £4,000 |
| No CT is paid | Claims under Corporation Tax Act (CTA)2010/S37, as extended by Finance Act (FA)2009/Schedule 6 to carry it back against CT profits of the 2020 AP (Note 3) |
The liability remains nil, being CT £20,000 less tax effect of loss £4,000 less IT suffered £16,000 and £4,000 IT is available for repayment.
Disregarding the loss carry back claim, there would have been no CT liability, because an Income Tax set-off removed it. There is, therefore, no S87A interest liability
See COM50040 for an example of how COTAX treats the S826 repayment interest on the sum to be repaid.
Please note that: In this example assume AP 01/04/2020 to 31/03/2021 had a loss which was surrendered as group relief.