CIRD90700 - R&D tax relief: SME scheme: payable tax credit: recovery of

FA00/SCH21/PARA3

Where it is found that a payable tax credit ought not to have been paid an assessment should be raised to recover the amount overpaid.

Provisions in FA98/SCH18/PARA52 (2)(ba) and (5)(ab) (introduced by FA00/SCH20/PARA3) allow the amount overpaid to be assessed.

The assessment is treated as an assessment of the accounting period for which the tax credit was paid. The assessment carries interest under TMA70/S87A from the date the payment being recovered was made until payment.

Paragraph 52 assessments are made under Case VI of Schedule D.

The payable tax credit is not a profit so a claim to losses under ICTA88/S393A cannot be set against the assessment. The payable tax credit is not an income from a transaction so Case VI losses cannot be set against the assessment either.

You cannot make these assessments in COTAX, you must use a CT10 (Z) set. The particulars to enter on the assessment are 'Paragraph 52 Schedule 18 Finance Act 1998'. Show the tax as payable now.

The assessment must be recorded on the CTA/CTC computer system within IRIS, by Input via terminal (IVT) - INP457. Guidance on INP457 can be found in the appendix to COTIN13.

You should use Schedule Code ‘09’ and Section Code ‘90’ within INP457 to identify this ‘non- standard’ assessment and show the ‘Due Date/Earliest Due Date’ as the date the payment being recovered was made. Details of all other entries within INP457 are detailed in the appendix to COTIN13.

Inspectors who have problems with INP457 should contact Ian Varley (BS Shipley).

Time limit

FA98/SCH18/PARA53 prescribes the time limits for making assessments under Paragraph 52. The time limit is the latest of:

• six years after the end of the accounting period to which it relates,
• the end of the accounting period following that in which the amount being recovered was paid,
• three months after the completion of an enquiry into a relevant company tax return.

In cases involving fraudulent or negligent conduct, the time limit is extended to 21 years after the end of the accounting period.