SACM11015 - Claims involving two or more years: how is the claim quantified

Paragraph 2(4) Schedule 1B sets out how the claim is to be quantified. It reads

(4) Subject to sub-paragraph (5) below, the claim shall be for an amount equal to the difference between-

(a) the amount in which the person is chargeable to tax for the earlier year (“amount A”); and

(b) the amount in which he would be so chargeable on the assumption that effect could be, and were, given to the claim in relation to that year (“amount B”).

The claim is quantified in terms of the tax difference in “the earlier year”. The “tax difference” is the tax that would not have been due in “the earlier year” if the claim could be and had been given effect to in that “earlier year”.

Example 1

Casey declared profits of £25,000 in her self-assessment return for 2018-19. Casey is now completing her tax return for 2019-20 and has made a loss of £10,000. Casey wishes to carry this back to 2018-19.

Casey’s claim is quantified as follows:

2018-19 original tax calculation (“amount A”)

Profits £25,000

Less Personal Allowance (£12,500)

£12,500

Tax at 20% £2,500

2018-19 tax calculation after effect is given to the claim (“amount B”)

Profits £25,000

Less Personal Allowance (£12,500)

Less Loss from 2019-20 (£10,000)

£2,500

Tax at 20% £500

Casey’s claim is calculated as the difference between “amount A” (£2,500) and “amount B” (£500).

Casey’s claim is, therefore, £2,000.

The claim is only quantified by reference to the earlier year. It remains a claim for the later year as that is the year in which the event giving rise to the claim occurred. For example, the year in which the loss arose.