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Tax Refunds and Repayment Supplements

I incurred a substantial loss in my business last year, and elected to carry the loss back against earlier tax years income to generate a tax refund. I received a repayment of tax but no interest supplement. I was expecting something as the tax I paid had been with the HMRC for more than 3 years!

If the resulting tax refund from your loss claim is to be set off against other tax liabilities outstanding then the effective date of payment is the later of the date the valid loss claim to relief was made and the relevant due date of the charge against which the relief is to be set.

If the tax refund is to be repaid to the taxpayer then the effective date of payment is the fixed filing date of the later year’s return.

Therefore a loss arising in 2007–08 and claimed on the 2008 return which was submitted on 1 June 2008 and carried back to 2004-05 tax year, submitted May 2005 would have an effective date of payment when being set off against other tax liability purposes of 1 June 2008 but an effective date of payment for repayment supplement purposes of 31 January 2009.

This is why you received no repayment supplement, as your tax refund was repaid to you instead or being set of against any current outstanding tax liabilities.

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