At the end of 2005, the overdrawn DLA is £10,000. If this is repaid in December 2006, can relief be claimed for 2005 (i.e. by reducing the tax due on 1.10.06)?
I think not, but HMRC are implying otherwise.
Also, the relief has to be claimed (by amending the tax return or letter), it is not given authomatically - correct?
Thanks for any comments.
Mason
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No.........
If the loan was advanced in y/e 31.12.2005, then s419 tax due on 1.10.06 is based on the loan balance at that date - so relief is given for any repayments in the period 1.1.06 to 1.10.06. You will know by the submission date for the CT600 (31.12.06) what the loan balance was at 1.10.06, so can claim relief on CT600A for the repayments made after the y/e.
If, however, the loan already existed at 1.1.05, then the s419 tax due is based on the balance at 31.12.05 (after taking into account any s419 tax already paid).
Any repayments made in December 2006 will not reduce the s419 tax liability until 1.10.07. You will need to claim relief in writing for these subsequent loan repayments as there is no facility on the CT600/CT600A to do so. It is not given automatically by HMRC.