COM50020 - Claims / reliefs: loss and non-trading deficits carry-back: loss carry-back / late payment int

Under S393A ICTA 1988 a company may claim to carry back trade losses against profits of the three previous years, apportioning profits of an AP where necessary.

S393 was amended by S39 F2A 1997. For losses arising on or after 2 July 1997 a company may only claim to carry back trade losses against profits of the preceding 12 months unless it is a terminal loss.

S87A(6) TMA 1970 recognises that any CT remaining unpaid for the earlier AP for which the set-off takes place is being reduced by a relief that originates later. It ensures that late payment interest (Word 27KB) should continue to run until the due date for the later AP, unless the carry back is against profits of an AP falling wholly within the previous twelve months.

Section 87A(6) achieves this by

• Identifying the notional unpaid CT liability that would have been due if the loss carry-back claim had not been made
• Charging Section 87A interest on the unpaid notional liability so computed, up to the earliest due date of the AP from which the loss was carried back

Example 1 (Word 30KB)

Concerns a case where a loss carried back meets an unpaid liability of an earlier AP. Interest is due on the amount covered by the loss set-off. It is payable for the period from the due and payable date of the earlier AP, to the due and payable date of the AP from which the loss was carried back.

Example 2 (Word 30KB)

Concerns a case where the company has paid the CT for the earlier AP in full before the carry-back. No interest is chargeable because the company paid the amount of the CT liability disregarding the loss carry-back claim on the due date.

If the company had paid the CT for the earlier AP in full, but late, interest would be due from the due date to the date of payment. The loss carry-back would attract no further interest in these circumstances.

Example 3 (Word 31KB)

The loss carried back displaces a relief already given for the earlier AP because the loss takes precedence. This could be ACT, Income Tax or SC60 tax, for example. In these cases if you disregarded the loss carry-back claim there would be no CT liability.

For legislation applying to this subject, see COM50021.