How is community investment tax relief (CITR) withdrawn or reduced under section 255 of the Corporation Tax Act 2010?

When CITR must be withdrawn or reduced, HMRC raises a corporation tax assessment for the accounting period in which the relief was originally obtained. This recalculates the company's tax liability for that earlier period to reflect the loss of the relief, effectively clawing back the benefit previously given.

What is the time limit for HMRC to assess a withdrawal of CITR under section 255?

HMRC has up to six years after the end of the accounting period for which CITR was originally obtained to make an assessment for its withdrawal or reduction. This is longer than the standard four-year time limit, recognising that qualifying issues with CITR investments may only emerge some time after the relief was claimed.

Can HMRC assess beyond six years for CITR withdrawal if there has been deliberate behaviour?

Yes. The six-year time limit does not override the separate rules for deliberate loss of tax. Under paragraph 46(2A) of Schedule 18 to the Finance Act 1998, HMRC can make assessments beyond six years where a company has deliberately caused a loss of tax in connection with its CITR claim.

Can you give an example of how CITR withdrawal works in practice under section 255?

If a company claims £50,000 CITR for the period ending 31 March 2022 and the investment later ceases to qualify, HMRC raises an assessment for that period to recover the relief. HMRC has until 31 March 2028 to do so, but can act beyond that date if deliberate behaviour is involved.

Corporation Tax Act 2010 section 255

Manner of withdrawal or reduction of CITR

Section 255 sets out the mechanism by which community investment tax relief (CITR) is withdrawn or reduced, including the time limits for making the necessary assessment.

Where CITR must be withdrawn or reduced, this is done by raising a corporation tax assessment for the accounting period in which the relief was originally obtained.
HMRC has up to six years after the end of the relevant accounting period to make such an assessment, rather than the standard four-year time limit that normally applies.
The extended six-year window ensures that HMRC has sufficient time to recapture relief linked to investments that cease to qualify under the CITR rules.
Where a loss of tax has been brought about deliberately, there is no time limit restriction — HMRC can still assess beyond six years under the separate provisions of Schedule 18 to the Finance Act 1998.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member