CREC071700 | Expenditure credit redemption: Step 5

S1179CC CTA 2009

Any amount remaining after Step 4 is used to discharge any other liability of the company to pay a sum to HMRC. This includes both:

• liabilities reported elsewhere on the CT600 tax return, such as section 455 tax on loans to company participators

• liabilities outside Corporation Tax – for example, an outstanding VAT charge or liabilities under any contract settlement

Only liabilities that are outstanding are discharged. A company cannot use credit to discharge tax already paid and receive a refund.

Example:

Production Company A has £100,000 credit remaining after Step 4. It also has an unpaid VAT liability of £15,000.

At Step 5, the VAT liability is fully discharged and reduced to nil. Production Company A has £85,000 credit remaining to carry forward to Step 6.