Corporation Tax Act 2010 section 357YP

Treatment of amounts deducted under section 357YO

Section 357YP explains how withholding tax deducted from restitution interest payments is treated for corporation tax purposes, and what happens if the payment turns out not to be restitution interest.

• Tax withheld from a restitution interest payment is treated as paid by the receiving company on account of its corporation tax liability on that interest, and goes towards discharging the company's tax bill for the relevant accounting period.
• If HMRC deduct tax from a payment that ultimately cannot or will not become restitution interest, and the company is not required to repay the net amount received, HMRC must refund the withheld tax and make any other necessary adjustments, regardless of any normal time limits.
• If instead the company is required to repay the gross amount to HMRC, the legislation treats the company as liable to repay the full gross payment, and the tax already withheld by HMRC counts as a partial repayment towards that gross liability.
• Where only part of the gross amount fails to qualify as restitution interest, the same rules apply with appropriate modifications to the relevant portion.