CREC071500 - Expenditure credit redemption: Step 3

S1179CC CTA 2009 

The amount remaining after Step 2 is used to discharge any liability of the company to pay Corporation Tax (CT) for any accounting period other than the current period. The CT liability of the current period is discharged earlier, at Step 1 (CREC071200). 

Only CT liabilities that are outstanding (due but not settled) are discharged. A company cannot use credit to discharge tax already paid and receive a refund. 

The legislation does not prescribe a priority order, so the company may decide.  In the absence of any offset specified by the company, HMRC may use its discretion to apply the offset. 

Example: 

Production Company A has £100,000 credit remaining after Step 2. It has £30,000 unpaid CT for the previous accounting period. 

The CT liability for the previous accounting period is fully discharged and reduced to nil. Production Company A has £70,000 credit remaining to carry forward to Step 4.