CTM82130 - Reform of Corporation Tax loss relief: Group relief for carried-forward losses: Prior surrenders
CTA10/S188DC
The unused parts of the surrenderable amounts must not include losses that have previously been surrendered for the overlapping period.
To identify amounts surrendered on prior claims for the overlapping period, identify any claims to group relief for carried-forward losses under
CTA10/S188CB and CTA10/S188CC by any company which relate to the same surrenderable amounts as the current claim.
If the prior claims have been withdrawn, you do not need to remove any amount from the surrenderable amounts of the surrendering company. If not, then take the following steps:
Step 1
Identify the overlapping period for the prior claim.
Step 2
Identify any period that is common to the overlapping period of the prior claim and the overlapping period of the current claim. If there is no common period, there is no previously used amount in relation to the prior claim and you do not need to remove any amount from the surrenderable amounts.
Step 3
If there is a common period, you must remove from the surrenderable amounts the amount used in the prior claim that relates to that common period. To determine this amount, take the proportion of the overlapping period for the prior claim that is included in the common period, and apply that proportion to the amount of group relief for carried-forward losses given on the prior claim. Follow this process for every prior claim that relates to the surrenderable amounts.
Example
In this example, losses have been time apportioned on a monthly basis for simplicity. Normally, time apportionment should be made by reference to days.
Companies A, B, C and S are all members of the same group for group relief purposes for the relevant periods. None of the conditions that would make group relief for carried-forward losses unavailable apply.
Company S made £250,000 trading losses in its accounting period 1 January 2019 to 31 December 2019, which it carries forward to its accounting period 1 January 2020 to 31 December 2020. Company C wishes to make a claim for group relief for carried-forward losses from Company S in its accounting period 1 July 2020 to 30 Jun 2021.
Company A also previously made a claim of £50,000 for group relief for carried-forward losses from Company S in its accounting period 1 April 2019 to 31 March 2020.
In addition, Company B previously made a claim of £100,000 for group relief for carried-forward losses from Company S. The accounting period for Company B is 1 May 2020 to 30 April 2021.
To determine the amount of Company S’s losses that may be surrendered to Company C, first determine the surrenderable amounts for the overlapping period for the current claim. The overlapping period for Company C’s claim is 1 July 2020 to 31 December 2020.
| Company S | Company C |
|---|---|
| S’s AP 1 Jan 2020 - 31 Dec 2020 | - |
| - | C’s AP 1 Jul 2020 - 30 Jun 2021 |
The proportion of Company S’s surrender period included in the overlapping period is 6/12. Applying this to the surrenderable amounts of £250,000, this means that £125,000 of Company S’s trading losses relate to the overlapping period.
Next, take the following steps to determine the amount of any of the surrenderable amounts for the overlapping period that have been used on prior claims made by Company A and Company B:
Company A’s prior claim
Step 1
Identify the overlapping period of Company A’s prior claim. The overlapping period for Company A’s claim is 1 January 2020 to 31 March 2020.
| Company A | Company S |
|---|---|
| - | S’s AP 1 Jan 2020 - 31 Dec 2020 |
| A’s AP 1 Apr 2019 - 31 Mar 2020 | - |
Step 2
Identify the period that is common to Company A’s and Company C’s claims.
Here, there is no period that is common to the overlapping periods for Company A’s and Company C’s claims. No amount therefore needs to be removed from the surrenderable amounts of the overlapping period for Company C’s claim in respect of Company A’s prior claim so Step 3 is not carried out.
Company B’s prior claim
Step 1
Identify the overlapping period of Company B’s prior claim. The overlapping period for Company B’s claim is 1 May 2020 to 31 December 2020.
| Company S | Company B |
|---|---|
| S’s AP 1 Jan 2020 - 31 Dec 2020 | - |
| - | B’s AP 1 May 2020 - 30 Apr 2021 |
Step 2
Identify the period that is common to Company B’s and Company C’s claims. The overlapping period for Company C’s claim is 1 July 2020 to 31 December 2020. The overlapping period for Company B’s claim is 1 May 2020 to 31 December 2020. The common period is 1 July 2020 to 31 December 2020.
| B’s claim overlapping period | C’s claim overlapping period |
|---|---|
| 1 May 2020 - 31 Dec 2020 | - |
| - | 1 Jul 2020 - 31 Dec 2020 |
Step 3
Determine the surrenderable amounts used for Company B’s prior claim for the common period. Take the proportion of the overlapping period of Company B’s claim that is included in the common period, and apply that to the group relief allowed to Company B. This is £100,000 x 6/8 = £75,000. £75,000 of the surrenderable amounts for the overlapping period for Company C’s claim has been used in Company B’s prior claim.
The amount of group relief for Company S’s carried-forward losses that may be surrendered to Company C is:
- The surrenderable amount for the overlapping period of Company C’s claim: £125,000,
Less
- The amount used in Company B’s prior claim: £75,000.
The maximum group relief for carried-forward losses that can be claimed by Company C from Company S is therefore £125,000 - £75,000 = £50,000.
Where time apportionment does not produce a just and reasonable result, another method is to be used that gives a result that is just and reasonable.