CTM05180 - Corporation tax: restriction on relief for carried-forward losses: deductions allowance nominated companies

CTA10/S269ZS and CTA10/S269ZSA

A nominated company is responsible for allocating the group deductions allowance (CTM05190) to companies that are members of a group (CTM05160) and are within the charge to Corporation Tax.

The nomination must be made by all the companies in the group that are within the charge to Corporation Tax (CTA10/S269ZS(1)) and must state the date the nomination takes effect, which may be before the date the nomination is made (CTA10/S269ZS(5)).

The nomination must be signed by an appropriate person on behalf of each company that is a member of the group and within the charge to Corporation Tax when the nomination is made (CTA10/S269ZS(5) and (6), CTA10/S1167). This includes dormant companies if they are still within the charge to Corporation Tax within the meaning of CTA10/S1167. However, there is no need for anyone to sign the nomination on behalf of any companies in the group that are not within the charge to Corporation Tax.

An appropriate person is a proper officer of the company or another person who has the authority of the company to act on its behalf. Proper officer takes the meaning defined in TMA70/S108(3) and(4).

If an individual is the appropriate person with respect to more than one company in the group, there is no need for that person to sign the nomination multiple times, so long as they make clear which companies they are signing on behalf of.

There is no need to submit the nomination to HMRC. However, groups should have a nomination in place which fulfils the legislative requirements, and should be able to supply this if it is requested.

Nominations cease to have effect when:

• A new group allowance nomination takes effect,
• The nomination is revoked in writing by a person who is an appropriate person, as defined above, in relation to a group company, or
• The nominated company ceases to be a company within the charge to Corporation Tax or ceases to be a member of the group.

(CTA10/S269ZS(7))

Changes in group membership

A group allowance nomination is of no effect unless it is signed by the appropriate person on behalf of each company that is, when the nomination is made, a member of the group and within the charge to Corporation Tax.

However, once the nomination has been made, it will not be affected by changes in membership of the group, provided that the nominated company itself continues to be a member of the group. If a company other than the nominated company joins or leaves the group after the nomination has been made, HMRC do not require the group to prepare a new nomination. Nominations cease to have effect only in the three situations listed above.

Nomination where a group ceases to exist for the purposes of Part7ZA

Where the ultimate parent of a group changes, for example following a corporate acquisition or demerger, the group ceases to exist for the purposes of s269ZZB(2). Any existing nomination will end and a new nomination under s269ZS cannot be made.

Where no nomination had effect immediately before the group ceased to exist, a new nomination may be made under s269ZSA by all companies that still exist at the time the new nomination is made and were a member of the group and within the charge to CT immediately before the group ceased to exist. The companies (including the nominated company) do not need to be within the charge to CT when the nomination is made.

This new nomination under s269ZSA will have effect for the period starting from the date stated on the nomination (which must be earlier than the date the group ceased to exist) until immediately before the group ceased to exist. Only one nomination may be made under s269ZSA in respect of a group and there is no provision to revoke a nomination once made.

The new nomination will be treated as if it were a nomination made under s269ZS with the modifications outlined above.

Where a nomination had effect immediately before the group ceased to exist, s269ZVA modifies s269ZT to ZV and allows the nominated company to submit an original or a revised GAAS for any period it was nominated immediately before the group ceased to exist.

S269ZSA and s269ZVA were introduced by s37 and Schedule 8 of Finance Act 2021 and apply retrospectively for accounting periods beginning on or after 1 April 2017 with commencement provisions for any accounting periods which straddle 1 April 2017.

Transitional provisions apply for groups which ceased to exist for the purposes of s269ZZB before these amendments were enacted. Where a nominated company (as mentioned in s269ZVA(1)(b)) wishes to submit a GAAS and the time limit for submitting the GAAS under s269ZT(4) is before 31 March 2022, the time limit for submitting the GAAS will be extended to 31 March 2022.