COM122020 - Repayments / reallocations: non automatic reallocations: S102 FA 1989/Reg 9 surrender
This subject is presented as follows
Surrender of overpayments within groups
Groups of companies can minimise their exposure to interest on overdue tax by surrendering overpayments within the group. A company that is a member of a group and is due a repayment can give notice jointly with another member of the group that it wants to surrender a specified amount of the refund to the other company.
S102(4) FA 1989
This applies where neither company pays their CT by quarterly instalments, see below for large companies for the Regulation 9 amendment to S102(4) FA 1989.
If joint notice is given in respect of an amount of tax, treat the recipient company as having paid the tax and the surrendering company as though the tax had been repaid to it, on the normal due date (Word 49KB) for the AP to which the tax relates. If the repayment is of CT paid late you use the date of payment. For the purposes of calculating any penalty that may arise, COTAX penalty processing will recognise the EDP as the date the notice was given. (See subject, 'Surrender Non COTAX Repayment To COTAX' (COM122030)).
Also, treat the recipient company as having paid any late payment interest (Word 27KB) under S87A TMA 1970 paid by the surrendering company on the amount of refund surrendered.
For this provision to apply
- Both the surrendering and recipient companies must be members of the same group from the date on which the AP to which the refund relates began, to the date on which they give notice
- The AP to which the refund relates must be the same for both companies
- The joint notice must be given to the Inspector dealing with the surrendering company before the refund is made
- Neither party to the surrender must be quarterly instalment payers
The recipient company can itself surrender the refund (or part of it) to another group company, provided it meets the above conditions.
Regulation 9 of the Quarterly Instalment Regulations
This Regulation amends S102(4) FA 1989 for quarterly instalment payers. Grouped companies who pay by Quarterly Instalments can surrender excessive instalment payments to other group companies. The difference to the S102(4) FA 1989 surrender is that the actual date of payment of a specified payment moves with that payment rather than the normal due date or date of payment if it is later. All the credit interest, debit interest, repayment interest postings relating to the surrendered payment move to the receiving company.
For this provision to apply
- Both the surrendering and recipient companies must be members of the same group from the date on which the AP to which the refund relates began, to the date on which they give notice
- The AP to which the refund relates must be the same for both companies
- The joint notice must be given to the Inspector dealing with the surrendering company before the refund is made
- The surrendering company must specify both the instalment and how much of it is to be surrendered
Regulation 9 continues to operate after the normal due date has passed.
S102(7) FA 1989
Any payment made between the surrendering and recipient companies in respect of a transferred tax refund is treated as having no tax consequences
- It is not taken into account in computing profits or losses of either company for CT purposes
- It is not regarded as a distribution or a charge on income
S102(8) FA 1989
Two companies are members of the same group for this purpose if they would be for the purposes of group relief. For more information see Corporation Tax (CT) Manual at CT2675 onwards.
Form of joint notice
There is no prescribed form which companies must use to give a joint notice of surrender. Although the notice can be in any form it should show
- The name and tax reference of the surrendering company
- The name and tax reference of the recipient company
- The type and amount of each refund surrendered
The notice should also contain a declaration jointly signed by an authorised person on behalf of each company.
Form CT200 - For CT Pay and File APs
Companies cannot give the joint notice on form CT200. They can use the form, however, to bring the joint notice to the attention of the Inspector.
The surrendering company should use Section 8 of form CT200 to claim its refund. In the part headed ‘How total overpayment is to be dealt with’ it can show that it wants to surrender all or part of the refund.
The recipient company can show an intended surrender in its return by completing Section 3 of the Return. It should enter the amount of the surrender in the final box, `Tax refunds surrendered to the company under S102 FA 1889’. It should also enclose a copy of the joint notice with the return.
Form CT600 - For CTSA APs
Companies cannot give the joint notice on form CT600. They can use the form, however, to bring the joint notice to the attention of the Inspector.
The surrendering company should use Section 7 of form CT600 (Version 1) to claim its refund. In the part headed ‘How repayments will be dealt with’ it can show that it wants to surrender all or part of the refund. In CT600 (Version 2) the claim will be made in CT600E and Box number 139.
The recipient company can show an intended surrender in its return by completing Section 4 of the CT600 (Version 1) Return. It should enter the amount of the surrender in the box, `Tax refunds surrendered to the company under S102 FA 1889’. It should also enclose a copy of the joint notice with the return. In CT600 (Version 2) this will be Box 145.
See Action Guide 'Reallocation within COTAX - responsible CT office' (COM122053) for how to action S102/Reg 9 claims on COTAX.
For a list of forms relevant to this subject, see COM122021.
For legislation applying to this subject, see COM122022.
