COM50040 - Claims / reliefs: loss and non-trading deficits carry-back: loss carry-back / repayment int
Trade Losses
A claim to carry back trade losses may result in a repayment of CT or Income Tax for the earlier AP to which the relief is carried back.
In cases where a loss is carried back to an AP not falling wholly within the previous 12 months S826(7A) ICTA 1988 provides that repayment interest (Word 29KB) is only payable from the due and payable date of the later AP in which the trading losses were incurred.
Example 1 (Word 30KB) illustrates this point.
Claim Under S242 ICTA 1988 (Abolished for APs beginning on or after 2 July 1997)
A similar provision in S826(7B) ICTA 1988 restricts the payment of repayment interest in connection with payments of tax credit.
A company can claim under S242 ICTA 1988 and S393A ICTA 1988 to carry back a trading loss and to treat Franked Investment Income as if it was an amount of profits.
When the loss is carried back to an AP not falling wholly within the previous 12 months, repayment interest on any payments of tax credit due is only payable from the due date of the AP of the loss.
Surplus ACT Caused By Loss Carry-Back
S826 (7AA) ICTA 1988 applies when surplus ACT created by a loss carried back (other than against an AP falling wholly within the previous 12 months) is itself carried back against a liability that is paid.
It ensures that repayment interest is allowed from the due date of the AP from which the loss is carried back.
Example 2 (Word 51KB) illustrates this point.
If the ACT carried back is to an earlier period before the start of CT Pay and File repayment supplement is paid under S825 ICTA 1988.
Repayment supplement is allowed as if it were a repayment for the AP in which the surplus ACT arose. For more information see the Company Tax (CT) Manual at CT2021
For legislation applying to this subject, see COM50041.
