SolvedCOM50040 | Claims/reliefs: loss and non-trading deficits carry-back: loss carry-back/repayment interest
From HM Revenue & Customs · COTAX Manual
In general, a trading loss carried back to an Accounting Period (AP) falling wholly within the previous 12 months has no interest consequences for the receiving AP and therefore needs no special treatment in COTAX, because the loss of the donating AP takes the interest effective date (EDP) of the recipient AP.
The only exception to this is if you are changing the rate at which the tax is charged. See COM50113 for further guidance on this area.
A trading loss carried back to an AP falling beyond the previous 12 months does have repayment interest consequences.
A claim to carry back trade losses may result in a repayment of CT or Income Tax for the earlier AP to which the relief is carried back.
In cases where a loss is carried back to an AP not falling wholly within the previous 12 months, S826(7A) Income and Corporation Taxes Act (ICTA) 1988 provides that repayment interest is only payable from the due and payable date of the later AP in which the trading losses were incurred.
Example below illustrates this point.
Example
| AP 01/04/2019 to 31/03/2020 | AP 01/04/2021 to 31/03/2022 |
| Agreed and assessed liability of £50,000 | Trade loss £20,000 (Tax effect £4,000) |
| Paid £50,000 on the due date, 01/01/2021 | Claims on 01/04/2023 to carry back the loss under Corporation Tax Act (CTA) 2010/S37, as extended by Finance Act 2009/Schedule 69 against profits of the 2020 AP |
A repayment of £4,000 is due to the company but repayment interest is only payable from 01/01/2023 (the due and payable date for the later AP) to the date of the repayment.
Please note that: In this example assume AP 01/04/2020 to 31/03/2021 had a loss which was surrendered as group relief.