COM122010 - Repayments / reallocations: non automatic reallocations: reallocation into COTAX - responsible CT office
This subject is presented as follows.
Set off an interest bearing amount against COTAX
Set off interest against COTAX
Set off of R&D Tax Credit, Film Tax Credit, Television Tax Credit and Video Games Tax Credit
Set off a Research and Development Expenditure Credit (RDEC)
Set off a SAFE repayment against COTAX
General
Where you have a credit that needs to be set off against a COTAX AP, you should use function DSET (District Set Off) to create the relevant posting on the AP record(s). Details of each set off are passed to OAS.
You need to use function DSET (District Set Off) to do one of the following.
- Create a credit posting (such as Research & Development).
- Set off an interest bearing amount against a COTAX liability.
- Set off interest against a COTAX liability.
You should not use DSET to set off an overpayment arising on a SAFE record, including CT61 charges, against COTAX. The DM Miscellaneous Charges unit in Shipley will reallocate or repay an overpaid charge. See COM23132 for further guidance.
Depending on the circumstances of the case, using DSET may do one or more of the following.
- Satisfy an existing liability for the AP on which you have made the set off.
- Create a reallocation to cover unpaid liabilities on other APs.
- Create an overpayment.
COTAX treats the amount you set off using DSET as a payment made:
- for the AP you set it off against
- on the EDP (Word 41KB) that you enter, but note that The EDP for R&D Credit, Film Tax Credit, Television Tax Credit and Video Games Tax Credit varies depending on how the credit will be utilised.
The EDP you enter must be the date from which the company should be given credit for the set off for interest purposes.
You cannot undo a DSET posting once you have made one. You must get it right first time. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
DSET codes
You can select from the following codes when using function DSET. Several of them are rarely appropriate as they apply only to CT Pay and File APs.
50900 CT / ACT for a pre-Pay & File AP. Select this entry when you are setting off an overpayment of Corporation Tax or Advanced Corporation Tax, for an AP that ended before 1 October 1993.
50902 CT / ACT for a pre-Pay & File AP (Northern Ireland). Select this entry if you are in Northern Ireland setting off an overpayment of Corporation Tax or Advanced Corporation Tax, for an AP that ended before 1 October 1993.
50880 ACT for a Pay & File AP. Select this entry when you are setting off an overpayment of Advanced Corporation Tax for an AP that ended after 1 October 1993. It is not appropriate for a repayment that has been created by an ACT carry-back.
50770 S419(4) ICTA 88. Select this entry when you are setting off an overpayment of Section 419 ICTA 1988 or a repayment of Section 419 tax that has arisen as a result of giving relief under Section 419 (4) ICTA 1988 for an AP that ended before 1 July 1999.
50775 IT Deducted at Source. Select this entry when you are setting off an overpayment of income tax deducted at source which is not within the other types in the list.
50888 Research & Development Tax Credit. Select this entry when you are setting off an overpayment of Research and Development Tax Credit.
50889 Land Remediation Tax Credit. Select this entry when you are setting off an overpayment of Land Remediation Tax Credit.
50774 Construction Industry Scheme (CIS25/SC60). Select this entry when you are setting off an overpayment of SC60 or CIS25 tax.
50773 Penalties. Select this entry when you are setting off an overpayment on a penalty charge that is not recorded on COTAX. Do not use this function to set off an overpayment on a CT penalty for an AP ending on or after 1 October1993. Use function REWD (Direct Reallocation Within COTAX) instead.
50771 Repayment Supplement. Select this entry when you are setting off an overpayment of repayment supplement.
50881 Repayment Interest. Select this entry when you are setting off an overpayment of repayment interest that is not recorded on COTAX. If the repayment interest is recorded on COTAX, use unction REWD (Direct Reallocation Within COTAX) instead.
50901 Late payment interest on Corporation Tax. Select this entry when you are setting off an overpayment of late payment interest other than late payment interest on Income Tax or ACT, that is not recorded on COTAX. If the late payment interest is recorded on COTAX, use function REWD (Direct Reallocation Within COTAX) instead.
50772 Late payment interest on Income Tax or ACT. Select this entry when you are setting off an overpayment of late payment interest on Income Tax or ACT.
51049 Petroleum Revenue Tax. Select this entry when you are setting off an overpayment of Petroleum Revenue Tax only when you are in an Oil Taxation Office.
51069 Advance Petroleum Revenue Tax. Select this entry when you are setting off an overpayment of Advance Petroleum Revenue Tax only when you are in an Oil Taxation Office.
50999 Film Tax Relief. Select this entry when you are setting off Film Tax Relief.
If you need to use DSET to offset a Tax Credit not mentioned above, use code 50888
Set off an interest bearing amount against COTAX
When you use function DSET the table below shows you what EDP to use when setting off the following interest bearing types of duty into COTAX.
| Types of duty | CT Pay & File APs | CTSA APs |
|---|---|---|
| IT deducted at source. | Nine months and one day after end of the AP. | The day after the end of the AP. |
| Tax credits. | Not applicable. | The later of the statutory filing date or the date the return is delivered, but see below for further details. |
| Research & Development Tax Credit. Note: This does not include R&D Expenditure credits, which do not attract interest. | Not applicable. | The later of the statutory filing date or the date the return is delivered, but see below for further details. |
| Land Remediation Tax Credit. | Not applicable. | The later of the statutory filing date or the date the return is delivered. |
| Construction Industry Scheme (CIS25 / SC60) for deductions up to 6 April 2002. | Nine months and one day after the end of the AP. | Nine months and one day after the end of the AP. |
| Construction Industry Scheme for set offs after 6 April 2002. | The date of the agreement to the set off. | The date of the agreement to the set off. |
See CTSA material dates (Word 112KB) for full details on all types of tax credits.
For these types of duty, select ‘N’ for the ALLOCATE TO DUTY TYPES AUTOMATICALLY field and then allocate the set off to tax. This allows COTAX to calculate any repayment interest due.
See COM125094 for the relevant action guide.
Set off interest against COTAX
When you use function DSET to set off interest, the EDP is the date the set off is made for:
- repayment interest
- repayment supplement
- late payment interest on CT
- late payment interest on IT or ACT.
For these set offs, select ‘N’ for the ALLOCATE TO DUTY TYPES AUTOMATICALLY field and then allocate the set off to interest. You need to do that to prevent COTAX calculating repayment interest when it is not due, as the payment type is not Corporation Tax.
Set off of R&D Tax Credit, Film Tax Credit, Television Tax Credit and Video Games Tax Credit
Under s826 ICTA88, companies are not entitled to repayment interest on any of the above credits before the later of the statutory filing date or the date the return claiming the credit is delivered. As a result, the credit is posted onto COTAX with an EDP equivalent to the later of those dates to ensure erroneous or excessive repayment interest is not paid.
This does not mean a company cannot receive the credit before that EDP, just that it isn’t entitled to any repayment interest before then.
For example, where APE 31 December 2012.
- Statutory filing date 31 December 2013.
- Return e-filed 7 October 2013.
- Claim for Film Tax Credit of £10,000.
The EDP to enter on DSET is 31 December 2013. The sum of £10,000 repaid on 12 October 2013 has no repayment interest added because it is repaid before the EDP used for s826 purposes.
However, where the credit is set off against another CT liability of the same AP, using the s826 EDP could result in COTAX calculating late payment interest beyond the date on which the company could otherwise have received a repayment. Using the above example and assuming the company is not large for the purposes of the instalment regulations:
- Film Tax Credit claim for £10,000 and
- s455 tax due £12,000.
The EDP to enter on DSET is 1 October 2013, that is the normal due date (NDD). There is no repayment interest as all the credit is being used to cover a sum due at 1 October 2013. If the s826 EDP of 31 December 2013 was used, the company would be charged late payment interest for 3 months on £10,000 of the s455 tax due, whereas if it had received a repayment it could have paid the s455 tax.
You must remember that the earlier EDP only applies to credits that are used to set off against a CT liability of the same AP. So, if the Film Tax Credit claim is for £10,000 and the s455 tax due is £5,000, the EDP to enter on DSET is:
- 1 October 2013 for £5,000 and
- 31 December 2013 for the balance of £5,000.
You must use the date that the return claiming the credit is delivered as the EDP where:
- the company is large and liable to pay by instalments for the AP and
- you are setting off a credit against other CT due for that AP.
This is because debit interest accrues earlier than the NDD.
You must ensure that this date is only used for set offs. Where some of the credit is repayable you should still use the s826 EDP on that part, to prevent the company accruing credit interest to which it is not entitled.
Where any credit is to be set off against an outstanding CT liability on an earlier AP:
- first, use function DSET to enter the credit on the AP of the claim, using the date that the return claiming the credit is delivered as the EDP
- then, reallocate against the earlier AP using the same EDP.
Set off a Research and Development Expenditure Credit (RDEC)
For full details on RDEC see CIRD89700+.
These instructions apply to RDEC that is set off against the record of the claimant company, or set off against the record of another member of the group following a surrender under CTA09/s104O(3) and s104R.
RDEC shouldn’t give rise to credit or repayment interest, therefore it is important that the correct EDP is used to minimise the possibility of interest being given.
NOTE: when posting RDEC onto a customer AP using function DSET, always use the code 50888 Research & Development and allocate to interest (Duty Types automatically no).
Where the RDEC in box 87 (Box 530) is equal to, or less than, the Company Tax Return Box 86 (Box 525) figure for tax chargeable, COTAX will process the RDEC onto the record and you will not need to do anything (step 1). If there are any incorrect allocations of RDEC against Boxes 79 to 82 (Boxes 490 to 505) these will be dealt with separately at a later date. If the company has already made payments for the period there may now be an overpayment of corporation tax and this should be processed in the normal way. Where the overpayment is as a result of COTAX processing the RDEC the EDP for that element of any overpayment should be noted as the day that the CTSA containing the RDEC claim was received.
An entry in Box 89 (Box 570) of the Company Tax Return for surplus credits payable will populate worklist MRPL. It could be made up of a number of items and you will need to check the computations to see the make- up of the RDEC and the company’s instructions on how any surplus RDEC is to be dealt with. You should process the RDEC on COTAX as follows:
- a) Notional tax that can only be used to discharge future CT liabilities (non-repayable), or surrendered to a profit making company to discharge its CT liability for any relevant accounting period (step 2), and it isn’t surrendered.
- No action is required as the sum will be included by the company in Box 87 (Box 530) of future returns. COTAX will process the RDEC as per step 1 when a return has sufficient tax chargeable in box 86 (Box 525)
- b) Notional tax that can only be used to discharge future CT liabilities (non-repayable) or surrendered to a profit making company to discharge its CT liability for any relevant accounting period (step 2), and the company has chosen to surrender some or all of it. (Note: any unused amount is treated as though it hadn’t been surrendered and a) above applies to it).
- Check that the receiving company has confirmed that it wishes to receive the surrender. If it has done so DSET the surrendered amount straight onto the receiving AP, using as the EDP the date when the DSET is carried out. Allocate only to tax liability which is shown in Box 78 (Box 475) of the receiving company’s CTSA. RDEC cannot be used to discharge interest at this step. Make a COTAX case note explaining where the DSET has come from.
- c) Capped RDEC that can only be used to discharge future CT liabilities (non-repayable) (step 3).
- Follow a) above.
- d) RDEC used to discharge the CT liability of any other AP (CT must be due at the date of the discharge) (step 4).
- DSET onto the originating AP, and allocating to the duty shown in Box 87 (Box 475). interest. Immediately reallocate to the other AP using REWD. Only reallocate to the extent that there is liability in Box 87 (Box 475) in charge for the receiving AP. RDEC cannot be used to discharge interest at this step.
- e) RDEC that is surrendered to a profit making company and can only be used by the recipient company to discharge its CT liability for any relevant accounting period (step 5). (Note: any unused amount is treated as though it hadn’t been surrendered and steps 6 and 7 then apply to it).
- Follow b) above,
- f) RDEC used to discharge any other liability that is due to HMRC (step 6).
- Inhibit repayments on the AP before using the date of the DSET entry as the EDP, allocate to duty type interest, and then immediately reallocate into OAS using REOD and complete the Intelligent Payment Processing (IPP) Single Form.
Note: ‘Any other liability’ could also include a late filing penalty or interest of the CT accounting period. In that case you should allocate to the relevant duty type when using function DSET, using the date of the DSET entry as the EDP.
- g) RDEC due to a loss making company (step 7).
- Use the date of the DSET entry as the EDP, allocate to duty type interest, and use DIRR on the same day to make the payment of the RDEC.
NOTE: See CIRD89820 for occasions when there may be restrictions on the step 7 credit.
RDEC for companies where the AP is part of an open Group Payment Arrangement (GPA)
Where a company is participating in an open GPA its AP record is locked until the arrangement for the AP has been closed and cleared. Until money has been apportioned out of the arrangement to the participating companies, it is difficult to ensure that all the provisions of Chapter 6A of CTA 2009 are complied with, and that the RDEC does not have unintended interest consequences. For an open GPA you must therefore proceed as follows:
- Where a company is entitled to a payment of RDEC under step 7, or the RDEC is being used to discharge other HMRC liabilities under step 6, ask the Group Payment Team in Banking Operations (Cumbernauld) to temporarily unlock the record so that you can carry out the necessary DSET and DIRR, or DSET and REOD, entries, and advise them when the action is completed so they can add the company back into the GPA. Contact the Group Payment Team by telephone on 03000 583947. The EDP should be the date that the DSET and other entries are carried out.
- Where RDEC is surrendered to a group company under step 2 or step 5, provided that company is outside the GPA you will be able to proceed immediately in accordance with the instructions for b) or e) above.
- Where RDEC is surrendered to a profitable group company under step 2 or step 5, and that company is within an open GPA, contact the Group Payment Team as above and follow b) or e) above.
- For there to be outstanding liability from another period against which to apply the RDEC under step 4, the GPA for that other period cannot be open. The record will not be locked and you can deal with as per d) above.
- Where RDEC is applied to future liabilities under steps 2 or 3 you need take no action as it will be dealt with by normal COTAX processing of future returns.
Set off a SAFE repayment against COTAX
Where you have an overpayment on SAFE or in respect of a CTA charge that has been archived and is being reduced, for the same AP the EDP is the normal due date (9 months and 1 day after the end of the AP).
For other APs, the EDP is the date on which the amount of the repayment is agreed - this is the amount of tax and any interest payable as calculated manually or refer to COM80200 to see the common period rules.
You must not use DSET to set off the overpayment, including CT61 charges, against COTAX.
See COM23132 for more information.
You need to complete a SAFE Repayments stencil (SAFE 1) and give it to your SAFE user who will set the ‘No Repayment’ signal on SAFE if necessary and send the form to the Miscellaneous Charges unit in Shipley. You can get the SAFE 1 stencil at Excel > SEES > Forms and Letters > category ‘SAFE’.
You should complete the stencil and enter ‘Repayment Set off’ in the space given to provide the reason for your repayment. In the same space, give full details of the reason and if appropriate details of any repayment supplement or interest that is due including the ‘from’ and ‘to’ dates for all non S455 CTA 2010 charges.
There is a separate section for you to complete where repayment interest is due for S455 charges. Where repayment interest is due you also need to supply the ‘to’ date so the Miscellaneous Charges unit can correctly calculate the interest due on the set off.
In the ‘Repayment Nominee’ box, enter the UTR, AP number and duty type where the overpayment is to be allocated.
The Miscellaneous Charges unit will arrange to reallocate the overpayment to the COTAX charge using OAS.
See Relief Instruction (RE) Manual at RE3195 regarding the calculation of repayment supplement for a pre-COTAX AP.
Notes:
- A payment type posting is recorded in VPPD (View Payment and Posting Details) when you use DSET and cannot be undone. You must use DSET carefully to ensure correct details are used. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
- You should use function DSET when you review the cases entered on the MRPL (Manual Repayments List).
- There are genuine risks in making manual repayments outside of COTAX and you must ensure that COTAX is updated to accurately reflect manual repayments.
See: