Serious consequences may arise from the simple entry of an incorrect date into HMRC’s self assessment computer system when dealing with carry back claims.

Carry back claims include:-

1.             Pension carry back.

2.             Loss carry back.

3.             Farmers’ averaging.

Interest calculations will run to the Effective Date of Payment (EDP) awarded to a set off or free standing credit.

The correct EDP is the later of:-

1.             The due date of the tax bill to which the credit is to be set; or

2.             The date the valid claim was made.

Whilst HMRC do get this right in most instances, you should always check the interest calculation to ensure the correct date has been used.

For example, an unincorporated business may make a profit in the 2007/08 tax year with the balancing payment of tax being due on 31 January 2009.  If that business makes a loss in the 2008/09 tax year, the loss may be carried back against 2007/08 with the EDP being the later of:-

1.             The date the valid claim is made; or

2.             31 January 2009. 

Posted on 07 Oct 2009