COM122070 - Repayments / reallocations: non automatic reallocations: surrender outside S102 FA 1989

S102 FA 1989 provides that, under specific circumstances, groups of companies can give notice that a repayment due to one group member is to be treated as tax paid by another group member. There is an interest advantage to the group from this arrangement.

A company may occasionally ask you to set off a repayment due to it against a liability of another company when Section 102 does not apply. There is no statutory basis for such a set-off, whether or not the companies concerned are members of the same group.

After checking that there are no arrears of tax or interest outside COTAX for the donating company you may wish to agree to such an arrangement as a matter of customer service or mutual convenience. If you do so it is important to make sure that neither company gains an interest benefit to which they are not entitled as a result of the arrangement.

You must insist that any request for a set-off is in writing and that an authorised person signs it on behalf of the surrendering company. You must acknowledge the request in writing in case of any later dispute regarding the making of the repayment. 

Interest

Do not apply the interest concessions contained in Section 102 but deal with any interest consequence using the normal rules in S87A TMA 1970 and S826 ICTA 1988

• Charge the recipient company late payment interest (Word 27KB) on any unpaid tax liability satisfied by the set-off from the normal due date until the date that you make the set-off
• Allow the surrendering company repayment interest (Word 80KB) from the later of the normal due date for the AP and the date of payment of the tax, until the date on which you make the set-off

Because there are two different companies involved the common period rule (Word 37KB) does not apply.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

For a list of forms relevant to this subject, see COM122061.

For a list of functions to use in particular situations, see COM122062.

For legislation applying to this subject, see COM122063.