COM52001 - Claims / reliefs: CTSA claims frameworks: introduction

Claims for pre-CTSA periods require the active participation of the Revenue, to give a decision on the claim and, where it is accepted, give effect to it. CT Pay and File made no difference to the general rules for claims, though it did alter the rules for certain specific claims, notably to group relief and capital allowances. S.42 TMA 1970 sets out a general procedure for making and handling claims, and S.43 TMA 1970 lays down a general time limit for claims.

Finance Act 1998 disapplies these rules from companies and replaces them with specific rules for CTSA APs. They are in Parts II and VII Sch.18 FA 1998.

Note: This section of COM is primarily concerned with the rules applying to claims for CTSA APs and makes only limited reference to the earlier rules. For information on the general rules applying to claims for pre-CTSA APs, search the Company Taxation (CT) Manual on the Intranet using the terms ‘TMA70/S42’ and ‘TMA70/S43’. For specific information about group relief and capital allowances for CTSA APs, see the CT Manual at CT10700+ and CT10800+ respectively. See CT10900+ for the special rules that apply for CTSA APs to claims under Section 419(4) ICTA 1988.

CTSA involves changes to the rules governing the various claims and elections which companies can make under the Taxes Acts. These changes are necessary to bring the claims regime in line with the ‘process now, check later’ principles governing CTSA.

Wherever possible, companies must make claims by including them in their company tax returns (or by amendment of the return) and by giving effect to them in their self assessments. This is in contrast to the position under CT Pay and File where it is the Revenue that gives effect to claims.

A claim included in a return is subject to the same ‘process now, check later’ procedures as any other entry in the return. For example, the Revenue has the right to correct obvious errors in the claim. It may also enquire into the validity and accuracy of a claim.

In some cases, it will not be possible for a claim or election to be dealt with in a company tax return. This may be, for example, because a claim affects an AP for which the company is no longer able to amend its return, or because an election has effect not just for one AP but until further notice. In such cases, Schedule 1A TMA 1970 (Claims and Elections not included in returns) provides

• For such claims to be given effect by HMRC by discharge or repayment of tax
• A parallel set of ‘process now, check later’ rules for dealing with these claims, providing for them to be corrected, enquired into and become final

All claims for a relief, an allowance or a repayment of tax must be quantified at the time the claim is made. ‘Quantified’ means that the claim must be expressed in figures. Formulaic claims are not allowed.

Many elections are not capable of immediate quantification, are not tied to specific APs, take effect from a particular date and remain in force until revoked.

If a company discovers that it has made a mistake in a claim or election, it may make a supplementary claim or election within the time allowed for making the original one.

The CTSA rules deal with claims and elections in three categories. For more information see the following subjects in this section

• ‘Claims And Elections Affecting One AP’ (COM52010)
• ‘Claims And Elections Involving More Than One AP’ (COM52020)

And

• ‘Claims And Elections Not Made In A Return’ (COM52030)

There are special rules for claims to group relief and to capital allowances for CTSA APs. Such claims can only be made in a return, either when the return is first made or by amendment, never under Sch.1A TMA 1970.

Certain other specific types of claim for CTSA APs cannot be made before the return is delivered. These are

• Claims for repayment of income tax
• Most claims to payment of tax credit (for as long as this is available)

And

• Claims for relief under the corporate venturing scheme

A company can amend its return to make a claim during the course of an enquiry into that return, but any consequent reduction in the tax liability or change to the amount of group relief surrendered does not take effect until the enquiry is concluded. However, the normal time limit for making a claim is not extended because an enquiry is in progress.

For detailed information about the legal background to claims, see the Company Taxation (CT) Manual at CT10600+.)

The ‘Process a Claim’ option in Function RAMA (Record / Amend Assessment) enables you to record the effect on the tax liability of claims which are not already taken into account in an original or amended self assessment (Word 28KB). When you use this option, the computer

• Issues a claim acknowledgement to the company (with a payslip attached, if there is any outstanding liability for the AP)
• Deals with any overpayment which results from the claim, by reallocating money to any outstanding liability on the computer record and repaying any balance. It will put the overpayment on either the Overpayments Review List (LOPU) or Overpayments List (LOPD) Work List if it is inhibited from handling it automatically
• Takes you, where appropriate, to Function PPEN (Prepare Penalty Determination) to make or amend any tax-related (Word 30KB) penalty determination, if the claim affects the tax base for the penalty. (It makes an entry on the Penalties Requiring Review List (PENR) Work List when you process the claim, and removes it when you make or amend the penalty determinations.)

Note: You only use option 4, ‘Process a Claim’, when the claim is under Schedule 1A TMA 1970. Otherwise you use option 1 ‘Record a Self Assessment’ or option 3 ‘Record a Taxpayer Amendment’, as appropriate.