CTM05150 - Corporation tax: restriction on relief for carried-forward losses: deductions allowance for a company in a group for part of an accounting period
CTA10/S269ZR
If a company is a member of a group (CTM05160) for part of an accounting period, it is entitled to:
- An appropriate part of the non-group deductions allowance (CTM05130) for the period when it was not a member of the group, and
- Any group deductions allowance (CTM05140) allocated to it for the remainder of the accounting period.
However, the company’s total deductions allowance cannot be greater than £5 million per 12 month accounting period (CTA10/S269ZR(2)). This amount is reduced proportionately if the accounting period is less than 12 months (CTA10/S269ZR(4)(b)).
The company should specify the amount of its deductions allowance in its tax return (CTA10/S269ZZ).
Appropriate part of the non-group deductions allowance
An appropriate part of the non-group deductions allowance for the period is calculated using the formula DNG/DAC x £5,000,000
- DNG is the number of days in the period on which the company is not a member of a group, and
- DAC is the total number of days in the period.
The appropriate part of the non-group deductions allowance is reduced proportionately if the accounting period is less than 12 months (CTA10/S269ZR(4)(a)).
Part of the group deductions allowance allocated
Where a company has been in a group for part of its accounting period, it may be allocated part of that group’s deductions allowance on the group allowance allocation statement (CTM05190, CTM05200).
However, there is a limit on the amount of deductions allowance the company can be allocated if it was not in the group for the whole of the nominated company’s accounting period. This is discussed at CTM05210.
If the company is not allocated any of the group’s deductions allowance, then the company’s deductions allowance will be limited to the appropriate part of its non-group deductions allowance only.