What does section 357YL of the Corporation Tax Act 2010 do?

Section 357YL ensures that corporation tax charged on restitution interest at the restitution payments rate cannot be reduced by any reliefs, set-offs or allowances. Restitution interest is taxed separately outside a company's total profits, and the resulting tax liability must be paid in full without any deductions.

Can trading losses or group relief reduce the tax on restitution interest under section 357YL?

No. Section 357YL ring-fences corporation tax on restitution interest so that no reliefs or set-offs can reduce it. This includes trading losses, group relief, capital allowances, management expenses and any other deductions. The prohibition is comprehensive and not limited to a specific list of reliefs.

Can income tax credits or corporation tax credits be offset against the restitution payments rate charge?

No. Income tax already paid, corporation tax credits and any other amounts that a company could normally set against its overall tax liability cannot be applied against the corporation tax charged at the restitution payments rate. The full tax on restitution interest must be paid without any credit offsets.

How is restitution interest taxed separately from a company's total profits?

Restitution interest paid by HMRC following a court order is excluded from a company's total profits calculation. It is instead taxed separately at the restitution payments rate. For example, £2,000,000 of restitution interest taxed at 45% produces a £900,000 charge that cannot be sheltered by losses or credits.

Corporation Tax Act 2010 section 357YL

Exclusion of reliefs, set-offs etc.

Section 357YL ensures that corporation tax charged on restitution interest at the restitution payments rate cannot be reduced by any reliefs, set-offs or allowances that might otherwise be available to the company.

Restitution interest is excluded from the calculation of a company's total profits for corporation tax purposes and is instead taxed separately under its own rules.
No reliefs or set-offs of any kind may be applied to reduce the corporation tax charged on restitution interest at the restitution payments rate.
The prohibition covers all reliefs and set-offs, including but not limited to those listed in Schedule 18 to the Finance Act 1998, such as trading losses, group relief and capital allowances.
Credits for income tax, corporation tax or any other amounts that can normally be offset against a company's overall tax liability for an accounting period cannot be offset against the corporation tax charged at the restitution payments rate.

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