COM50130 - Claims / reliefs: loss and non-trading deficits carry-back: trade loss carry-back - leap year
When you allow relief for a trade loss against an AP falling wholly within the previous twelve months there is normally no problem with late payment interest (Word 27KB) or repayment interest (Word 29KB).
However, the computer incorrectly charges late payment interest and restricts repayment interest in cases when
- The receiving AP is a 12 month AP and the donating AP is shorter than 12 months
And
- The donating or the receiving AP straddles 29 February, in a leap year
Example 1
AP1 is for the period 1/1/1995 to 31/12/1995
AP2 is for the period 1/1/1996 to 30/6/1996
AP2 is shorter than 12 months and it straddles 29 February in a leap year.
Example 2
AP1 is for the period 1/4/1995 to 31/3/1996
AP2 is for the period 1/4/1996 to 31/12/1996
AP2 is shorter than 12 months and AP1 straddles 29 February in a leap year.
In each example the loss is carried back no more than 12 months. Trade losses carried back no more than 12 months are fully effective in discharging liability for interest purposes. (Note their exclusion from the restricting provisions in S87A(6) TMA 1970 and S826(7A) ICTA 1988 for late payment interest and repayment interest respectively)
The computer mistakenly treats the loss as carried back for more than one year because of the presence of the extra day in a leap year. It applies an incorrect Effective Date of Payment (EDP (Word 41KB)) to the ‘LOS’ posting that it creates. It uses the due date of the AP of the loss instead of the AP in which relief is given.
When you use Function PAST (Prepare Full Assessment) to allow the loss relief you will need to alter the EDP shown in screen COT120M to the due date for the receiving AP.
For a list of functions to use in particular situations, see COM50131.
For legislation applying to this subject, see COM50132.
