CTM82140 - Reform of Corporation Tax loss relief: Group relief for carried-forward losses: Claimant company’s relevant maximum

CTA10/188DB to CTA10/S188DE

The amount of group relief for carried-forward losses that can be claimed is limited to the lower of:

Relevant maximum calculation

The claimant company’s relevant maximum is determined as follows:

Step 1

Calculate the relevant maximum for the claim period in accordance with the general restriction on relief for carried-forward losses (CTA10/S269ZD(4)).

Step 2 (a)

Deduct from the relevant maximum any losses or other amounts the company has already claimed for the period listed in parts (a) to (d) of Step 2 in s188DD(1), under:

  • CTA10/S45(4)(b) or 45B(4) (see Step 2 (b) below)
  • CTA10/S303B or 303D by virtue of section 304(5)
  • CTA09S457(3) or 463H(5).The deduction under section s463H(5) does not include deduction of a shock loss (CTA10/S188DD(2))
  • FA12/S124(5), 124A(5) or 124C(6), and
  • any deductions within CTA10/S269ZD(3) (a) to (i) and (k).

Step 2 (b)

For Step 2 (a) above, exclude any deductions under s45(4)(b) or s45B(4) that would be ignored for the purposes of CTA10/S269ZB. These are:

  • losses of film trade under CTA09/S1209(3), 1210(5A) or 1211(7A)
  • losses of television programme trade under CTA09/S1216DA(3), 1216DB(5A) or 1216DC(7A)
  • losses of video game trade under CTA09/S1217DA(3), 1217BD(5A) or 1217DC(7A)
  • losses of theatrical trade under CTA09/S1217MA(3) or 1217MC(9)
  • losses of orchestral trade under CTA09/S1217SA(3) OR 1217SC(9)
  • losses of museum or gallery exhibition trade under CTA09/S 1218ZDA(3) or 1218ZDC(9)
  • losses of UK or EEA furnished holiday lettings business under CTA10/S65(4B) or 67A(5A)
  • insurance companies: shock losses under CTA10/S269ZJ(1)
  • certain ring fence trades losses under CTA10/S304(7)
  • pre-1 April 2017 loss arising from oil contractor activities under CTA10/S356NJ(2)

Step 3

Take the proportion of the claim period included in the overlapping period and apply that to the amount arrived at after Step 2. Time apportionment basis should be used unless this gives an unjust or unreasonable result, in which case another method which would give a just and reasonable result is to be used instead (CTA10/S188DF(3)).

Relevant maximum calculation for company with qualifying profit lower than the deductions allowance

CTA10/S188DD(3)

When a claimant company has qualifying profits for the claim period that are less than its deductions allowance for the same period, the relevant maximum calculation is modified as follows:

Step 1

Calculate the qualifying profits for the claim period in accordance with CTA10/S188DD(3A).

Step 2

Deduct from the qualifying profit any losses or other amounts the company has already claimed for the period as listed in Step 2(a) above. For this purpose, a deduction made under CTA10/S45(4)(b) or 45B(4) of the types of loss listed in Step 2(b) should be included. The effect of this is that the losses that will be deducted are any that have been claimed for the period whether or not they are subject to the loss restriction.

Step 3

Take the proportion of the claim period included in the overlapping period and apply that to the amount arrived at after step 2. Time apportionment basis should be used unless this gives an unjust or unreasonable result, in which case another method which would give a just and reasonable result is to be used instead (CTA10/S188DF(3)).

Qualifying profits

CTA10/S188DD(3A)

To calculate the qualifying profits:

deduct

Example 1: Relevant maximum calculation

In this example, losses have been time apportioned on a monthly basis for simplicity. Normally, time apportionment should be made by reference to days.

Company A and Company B are members of the same group of companies for group relief purposes throughout the relevant periods.

Company A has a 12 month accounting period (AP) ending 31 December 2019. For that period, it makes a claim for relief from total profits for its carried-forward trading losses of £20,000 and carried-forward non-trading loan relationship deficits (NTLRDs) of £10,000. It also makes a claim for group relief for carried-forward losses from Company B. Company B has carried forward post-1 April 2017 losses of £50,000 to its 12 month AP ending 30 September 2019. Company A’s relevant maximum for the claim period ending 31 December 2019 calculated in accordance with section 269ZD(4) is £150,000.

The relevant maximum for the overlapping period is calculated as follows:

Step 1

The relevant maximum calculated in accordance with section 269ZD(4) for the AP ending 31 December 2019 is £150,000.

Step 2

From the relevant maximum deduct the losses already claimed for the period:

Description Amount
Relevant maximum £150,000
Carried-forward trading losses (£20,000)
Carried-forward NTLRDs (£10,000)
- £120,000

Step 3

The amount after Step 2 is apportioned by reference to the proportion of the claim period included in the overlapping period, which is 9 months from 1 January 2019 to 30 September 2019.

£120,000 x 9/12 = £90,000.

The relevant maximum for the overlapping period is £90,000.

Example 2: Relevant maximum calculation for company with qualifying profit lower than the deductions allowance

Companies C and D are members of the same group of companies for group relief purposes.

Company C has qualifying profits of £200,000 and a deductions allowance of £250,000 for the 12 months AP ending 31 December 2019. For this period, it makes a claim for relief from total profits for its own carried-forward trading losses of £60,000 and a claim for group relief for carried-forward losses from Company D. Company D carried forward post-1 April 2017 losses of £100,000 to the 12 month AP ending 30 June 2019.

Step 1

Company C’s qualifying profit of £200,000 for AP ending 31 December 2019 was calculated in accordance with section 188DD(3A).

Step 2

From the qualifying profit deduct the losses already claimed for the period:

Description Amount
Qualifying profit £200,000
Carried-forward trading losses (£60,000)
- £140,000

Step 3

The amount after Step 2 is apportioned by reference to the proportion of the claim period included in the overlapping period, which is 6 months from 1 January 2019 to 30 June 2019.

£140,000 x 6/12 = £70,000.

The relevant maximum for the overlapping period is £70,000.