CTM82120 - Reform of Corporation Tax loss relief: Group relief for carried-forward losses: Surrenderable amounts

CTA10/S188DC

The loss that is available for surrender as group relief for carried-forward losses is the unused part of the surrenderable amounts. This is the amount of surrenderable loss which is attributable to the overlapping period that has not already been surrendered.

Surrenderable amounts

The surrenderable amounts are the losses and other amounts that are eligible for surrender as group relief for carried-forward losses. (CTA10/S188BB(7))

The surrenderable amount relating to the overlapping period is the proportion of surrenderable amounts carried forward to the surrender period that are attributable to the overlapping period of the current claim. To calculate this, take the proportion of the surrender period included in the overlapping period, and apply that proportion to the surrenderable amounts (CTA10/S188DC(2)).

The loss or other amount should be time apportioned, unless this gives an unjust or unreasonable result in which case another method which gives a just and reasonable result is to be used. Normally, time apportionment should be made by reference to days in a period.

To determine the amount available, the company will also need to calculate the amount of loss relating to the overlapping period that has already been surrendered.

Example

In this example, losses have been time apportioned on a monthly basis for simplicity. However as noted above, time apportionment should normally be made by reference to days. P Ltd and Q Ltd are members of the same group of companies throughout the relevant periods.

P Ltd has £400,000 of trade losses incurred post-1 April 2017 which it has carried forward to the AP 1 July 2017 to 30 June 2018. Q Ltd has made a claim for group relief for carried-forward losses from P Ltd in its AP 1 January 2018 to 31 December 2018. Q Ltd has sufficient total profits against which the claimed losses can be offset.

The overlapping period is 1 January 2018 to 30 June 2018. P Ltd can only surrender losses attributable to the overlapping period. The proportion of the surrender period included in the overlapping period is 6/12. The amount attributable to the overlapping period can be determined by time apportionment.

£400,000 x 6/12 = £200,000

If time apportionment does not create a just and reasonable result then another method which produces a just and reasonable result may be used (CTA10/S188DF(3)).