CREC073300 - Expenditure credit redemption: example 3 - loss-making year 1, profit-making year 2
CT = Corporation听罢ax听
AP = accounting period
Year 1听
Company 3, Year 1听 |
Values听 |
Loss听 |
(拢150,000)听 |
CT liability @ 25%听 |
nil听 |
Credit for this AP听 |
拢200,000听 |
Credit brought forward听 |
nil听 |
Credit received from group member(s)听 |
nil听 |
CT liability of other AP(s)听 |
nil听 |
Other liabilities听 |
nil听 |
PRE-STEP 1 RESTRICTION听
The amount of credit brought forward听and the amount of credit received from group member(s) are used, in that order, to discharge the CT liability for this AP.听
Company 3 has no brought forward credit or amounts surrendered by a group member, so there is no need to apply the restriction.听
STEP 1听
The credit amount for this AP is used to discharge the CT liability for this AP.听
-听 |
Values听 |
Credit for this AP听 |
拢200,000听 |
CT liability听 |
nil听 |
Credit remaining听after discharge听 |
拢200,000听 |
STEP 2听
If the amount of credit remaining听after Step 1 exceeds the initial听credit amount net of a notional tax charge, it is to be reduced to the initial听credit amount net of a notional tax charge.听
The notional tax charge is at the main rate of CT, 25%.听
-听 |
Values听 |
Amount of credit remaining听after Step 1听 |
拢200,000听 |
Net credit (拢200,000 less 25%)听 |
拢150,000听 |
Carry forward lesser amount to Step 3听 |
拢150,000听 |
Credit withheld at Step 2听 |
拢50,000听 |
The withheld amount is not available as a payable credit now or in future but can be surrendered to a group member or used to discharge CT liability in later years.听
STEP 3听
The amount of credit remaining听after Step 2 is used to discharge any liability of the company to pay CT for any other AP.听
-听 |
Values听 |
Credit remaining听after Step 2听 |
拢150,000听 |
CT liability of other AP(s)听 |
nil听 |
Credit remaining听after discharge听 |
拢150,000听 |
STEP 4听
If the company is a member of a group, it may surrender some or all of听the amount remaining听after Step 3 to any other member of the same group.听
-听 |
Values听 |
Credit remaining听after Step 3听 |
拢150,000听 |
Amount surrendered to group member听 |
nil听 |
Amount remaining听after surrender听 |
拢150,000听 |
STEP 5听
The amount of credit remaining听after Step 4 is used to discharge any other liability of the company to pay a sum to HMRC, eg.听VAT or an amount due under a contract settlement.听
-听 |
Values听 |
Credit remaining听after Step 4听 |
拢150,000听 |
Other liabilities听 |
nil听 |
Credit remaining听after discharge听 |
拢150,000听 |
STEP 6听
The amount remaining听after Step 5 is payable to the company by HMRC, provided that:听
the company is not in administration or liquidation,听
HMRC has not opened an enquiry into the company鈥檚 tax return,听
the company does not have unpaid amounts of PAYE, Class 1 NICs or withholding tax for visiting performers.听
Company 3听meets the conditions and receives 拢150,000 payable credit.听
Summary听 |
Values听 |
Withheld at Step 2听 |
拢50,000听 |
Payable at Step 6听 |
拢150,000听 |
Total credit for this AP听 |
拢200,000听 |
SURRENDER TO GROUP MEMBER听
If the company is a member of a group, it may surrender some or all of听the amount听withheld at Step 2, plus any credit brought forward听and not used at the pre-Step 1 restriction, to any other member of the same group.听
Although Company 3 has 拢50,000 credit withheld at Step 2, it chooses not to surrender any to group members.听
AMOUNTS CARRIED FORWARD听
Any amount withheld at Step 2 and/or any unused credit brought forward which is听not surrendered to a group member is carried forward to the next AP.听
Company 3听has no amount of unused credit brought forward, but it does have 拢50,000 withheld at Step 2 and not surrendered to a group member.听
Company 3听carries forward 拢50,000 credit to the next AP, which is brought in at the pre-Step 1 restriction for that AP.听
听
Year 2听
Company 3, Year 2听 |
Values听 |
Profit听 |
拢600,000听 |
CT liability @ 25%听 |
拢150,000听 |
Credit for this AP听 |
拢250,000听 |
Credit brought forward听 |
拢50,000听 |
Credit received from group member(s)听 |
nil听 |
CT liability of other AP(s)听 |
nil听 |
Other liabilities听 |
nil听 |
PRE-STEP 1 RESTRICTION听
The amount of credit brought forward听and the amount of credit received from group member(s) are used, in that order, to discharge the CT liability for this AP.听
-听 |
Values听 |
Credit brought forward听 |
拢50,000听 |
CT liability听 |
拢150,000听 |
CT liability after discharge听 |
拢100,000听 |
Remaining credit brought forward听 |
nil听 |
STEP 1听
The credit amount for this AP is used to discharge the remaining CT liability for this AP.听
-听 |
Values听 |
Credit for this AP听 |
拢250,000听 |
CT liability听 |
拢100,000听 |
CT liability after discharge听 |
nil听 |
Credit remaining听after discharge听 |
拢150,000听 |
STEP 2听
If the amount of credit remaining听after Step 1 exceeds the initial听credit amount net of a notional tax charge, it is to be reduced to the initial听credit amount net of a notional tax charge.听
The notional tax charge is at the main rate of CT, 25%.听
-听 |
Values听 |
Amount of credit remaining听after Step 1听 |
拢150,000听 |
Net credit (拢250,000 less 25%)听 |
拢187,500听 |
Carry forward lesser amount to Step 3听 |
拢150,000听 |
Credit withheld at Step 2听 |
nil听 |
STEP 3听
The amount of credit remaining听after Step 2 is used to discharge any liability of the company to pay CT for any other AP.听
-听 |
Values听 |
Credit remaining听after Step 2听 |
拢150,000听 |
CT liability of other AP(s)听 |
nil听 |
Credit remaining听after discharge听 |
拢150,000听 |
STEP 4听
If the company is a member of a group, it may surrender some or all of听the amount remaining听after Step 3 to any other member of the same group.听
-听 |
Values听 |
Credit remaining听after Step 3听 |
拢150,000听 |
Amount surrendered to group member听 |
nil听 |
Amount remaining听after surrender听 |
拢150,000听 |
STEP 5听
The amount of credit remaining听after Step 4 is used to discharge any other liability of the company to pay a sum to HMRC, e.g.听VAT or an amount due under a contract settlement.听
-听 |
Values听 |
Credit remaining听after Step 4听 |
拢150,000听 |
Other liabilities听 |
nil听 |
Credit remaining听after discharge听 |
拢150,000听 |
STEP 6听
The amount remaining听after Step 5 is payable to the company by HMRC, provided that:听
the company is not in administration or liquidation,听
HMRC has not opened an enquiry into the company鈥檚 tax return,听
the company does not have unpaid amounts of PAYE, Class 1 NICs or withholding tax for visiting performers.听
Company 3 meets the conditions and receives 拢150,000 payable credit.听
Summary听 |
Values听 |
Discharge at Step 1听 |
拢100,000听 |
Payable at Step 6听 |
拢150,000听 |
Total credit for this AP听 |
拢250,000听 |
SURRENDER TO GROUP MEMBER听
If the company is a member of a group, it may surrender some or all of听the amount听withheld at Step 2, plus any credit brought forward and not used at the pre-Step 1 restriction, to any other member of the same group.听
Company 3 has no amount of credit withheld at Step 2 or unused credit brought forward, so there is no need to consider a surrender.听
AMOUNTS CARRIED FORWARD听
Any amount withheld at Step 2 and/or any unused credit brought forward which is not surrendered to a group member is carried forward to the next AP.听
Company 3 has no amount of credit withheld at Step 2 or unused credit brought forward, so there is no amount carried forward.听