Statement of practice SP5/2001: loss relief, capital allowances and group relief

CTSA: Claims to loss relief, capital allowances and group relief outside time limit

1. The Board of Inland Revenue have powers under

• Section 393A(10) ICTA88 to admit late claims to set off or carry back losses
• paragraph 82(2) Schedule 18 FA 1998 to allow the late making, amending or withdrawing of claims for capital allowances
• paragraph 74(2) Schedule 18 FA 1998 to allow the late making or withdrawing of claims for group relief.

In this statement references to making claims should be read accordingly so that

• for capital allowances, making a claim includes amending or withdrawing a claim and
• for group relief, making a claim includes withdrawing a claim.

The statement explains the time limit rules, sets out the Board's general approach to late claims and gives details of the procedures to be followed.

The normal rules

Loss relief

2. Loss relief claims can be made within two years of the accounting period in which the loss is incurred. A loss relief claim made in a Company Tax Return may be amended at any time up to 12 months from the statutory filing date or, if the claim is within the rules in Schedule 1A TMA 1970 within 12 months of making the claim.

Capital allowances

3. Claims to capital allowances under CTSA can be made, amended or withdrawn, up to the latest of

• the first anniversary of the claimant company's filing date
• if the Revenue issues a notice of enquiry into the claimant company's return, 30 days after the enquiry is completed
• if the claimant company's return is amended by the Inland Revenue following an enquiry (under paragraph 34(2) Schedule 18 FA 1998), 30 days after notice of the amendment is issued
• if the claimant company appeals against the Revenue's amendment, 30 days after the date on which the appeal is finally determined.

Group relief

4. Claims to group relief under CTSA can be made or withdrawn up to the latest of the following dates:

• the first anniversary of the claimant company's filing date
• if the Revenue issues a notice of enquiry into the claimant company's return, 30 days after the enquiry is completed
• if the claimant company's return is amended by the Inland Revenue following an enquiry (under paragraph 34(2) Schedule 18 FA 1998), 30 days after notice of the amendment is issued
• if the claimant company appeals against the Revenue's amendment, 30 days after the date on which the appeal is finally determined.

5. In general a claim to group relief can only be made where notice of consent has been given by the surrendering company and the claim must be accompanied by a copy of the notice. But groups may apply to the Board to enter into simplified arrangements for claiming and surrendering group relief (SI 2975/1999).

Special rules where the Revenue makes certain assessments or amendments

6. Special time limit rules apply where the Revenue makes certain assessments or amendments. They are

• a Revenue amendment of a Company Tax Return under paragraph 34(2)(b) Schedule 18 FA 1998
• a discovery assessment made under paragraph 41 Schedule 18 FA 1998 (other than an assessment made in a case involving fraudulent or negligent conduct ), and
• an assessment to recover excess group relief made under paragraph 76 Schedule 18 FA 98.

7. Where such an assessment or amendment is made, a company may under paragraph 61 Schedule 18 FA 1998 make, revoke or vary certain claims etc. The time limit for these claims is one year from the end of the accounting period in which the closure notice was issued or the assessment was made. Any claims etc. made, given, revoked or varied cannot reduce the combined tax liability of the company and any other persons affected by an amount greater than the additional liability to tax arising from the amendment or assessment.

8. Where the Revenue makes a discovery assessment under paragraph 41 Schedule 18 to recover tax lost through fraudulent or negligent conduct, the rule in paragraph 65 Schedule 18 applies. It allows the admission of any claims which can be given effect in that assessment regardless of time limit.

Board's approach to extending time limits for making claims

9. The time limits allowed for making claims to loss relief, capital allowances and group relief under CTSA and the further provisions described above should generally be adequate and the Board will not make routine use of its powers to accept claims made outside these limits. But the Board recognises that there may be exceptional reasons why a claim is not made within the time specified. Applications to allow further time in accordance with the powers referred to at paragraph 1 above will be considered with the assistance of the following criteria.

10. In general, the Board's approach will be to admit claims which could not have been made within the statutory time limits for reasons beyond the company's control. This would include, for example, cases where

• at the date of the expiry of the time limit, the company or its agents were unaware of profits against which the company could claim relief, or
• the amount of a profit or loss depended on discussions with an Inspector which were not complete when the time limit expired, and the delay in agreeing figures is not substantially the fault of the company or its agents.

In such cases the Board's approach will be to admit late claims up to the amount of the profit or loss in question. Where the claim involves the withdrawal of an existing claim and the making of a fresh claim, the Board's approach will be to admit these to the extent of the profit or loss in question. Claims which go beyond this and affect profits which were not in dispute at the time of expiry of the statutory time limits will not be within this approach.

Reasons beyond the company's control would also include a claim where all of the following four features were present:

• an officer of the company was ill or otherwise absent for a good reason
• the absence or illness arose at a critical time and prevented the making of a claim within the normal time limit
• there was good reason why the claim was not made before the time of the absence or illness
• there was no other person who could have made the claim on the company's behalf within the normal time limit.

11. The Board would not, however, regard the following as reasons beyond the company's control:

• oversight or negligence on the part of a claimant company or its agent
• failure, without good reason, to compute the necessary figure
• the wish to avoid commitment pending clarification of the effects of making a claim
• illness or absence of an agent or adviser to the company.

12. There may be cases falling outside the general approach outlined in paragraph 10 where it would nevertheless be unreasonable, given the overall circumstances of the case, for the Board to refuse a late claim. It is likely that such cases will involve a combination of factors, but the following criteria may be relevant:

• the reason why a claim is late - where the reason does not in itself warrant admission of the claim under the approach outlined above, it will still be taken into account by the Board in assessing the circumstances as a whole
• the extent to which it is late
• the consequences for the company if the claim is refused
• any particularly unusual features.

For the purpose of this paragraph and those above, if the late claim forms part of a scheme or arrangement, the main purpose or one of the main purposes of which is the avoidance of tax (including the payment of tax), then that will be taken into account in the Board's approach.

Procedures

13. An application to admit a claim outside the statutory time limits should be sent to the Inspector dealing with the claimant company and should include a full explanation of the circumstances of the case. The explanation should cover, but need not be limited to, all the criteria set out in paragraph 12. The application should be made as soon as possible. Delay in making a late claim after the circumstances which caused the claim to be late have ceased to apply may result in the claim being rejected.