CTM82525 - Corporation Tax: Group relief for carried-forward losses: Consortia: Restrictions on claims under conditions 3 or 4
CTA10/S188EB, CTA10/S188EI-EK
Where the claimant company is either a member of the consortium, or in the same group of companies as a member of the consortium, the amount of relief that can be given for group relief for carried-forward losses is limited to the lower of:
- the unused parts of the surrenderable amounts attributable to the loss-making period (CTA10/S188EC),
- the claimant company’s relevant maximum for the overlapping period less any amount previously claimed for the same period (CTA10/S188EE), and
- the claimant company’s potential Part 5 group relief amount (CTA10/S188EF).
Claims under condition 4
CTA10/S188EI
There is a maximum amount of relief that can be claimed overall for the surrender period where claims are made under condition 4 by companies in the same group as the link company. This cannot exceed the amount that the link company is entitled to based on its ownership proportion of the consortium company.
The total amount of relief that can be given for claims under conditions 3 and 4 by the link company and group companies cannot exceed the amount that would be available to the link company for relevant consortium claims, if claims under condition 4 were ignored.
A relevant consortium claim is a consortium claim for group relief for carried-forward losses, from the surrendering company for the same surrender period and loss-making period.
Example
Company L is a consortium member, and Company M is a consortium company. Company L owns 50% of Company M. Company N is in a group of companies with Company L.
Company M has carried-forward losses of £1,000,000. Condition 4 is met throughout the period from the loss-making period to the surrender period. Total claims for the surrender period from Companies L and N for those losses cannot exceed £500,000, subject to the claimants’ relevant maxima (CTM05030) and potential Part 5 amounts.
Claims under condition 3 or 4
Arrangements (CTA10/S188EJ)
For claims relating to condition 3 or 4, if during any part of the overlapping period there are certain arrangements in place, then the consortium company’s surrenderable amount for the overlapping period is limited to 50% of what it would otherwise be under CTA10/S188EC(2).
Relevant arrangements are those which prevent the member of the consortium or link company (either alone, or together with other consortium member companies) from controlling the surrendering company, where it would otherwise control the company and which form part of a scheme with a main purpose of giving the claimant company a tax advantage.
Surrenderer is in a group of companies (CTA10/S188EK)
If the surrendering company is a member of a group of companies, then group relief takes precedence over consortium relief. This means that the surrenderer’s surrenderable amount attributable to the loss-making period for the overlapping period is reduced by a proportion of the group’s potential relief relating to the loss-making period.
The group’s potential relief is the maximum amount of group relief for carried-forward losses (CTA10/PART 5A) that the surrenderer could have surrendered for the surrender period based on the group condition. The group’s potential relief doesn’t include any losses or other amounts that have actually been surrendered based on the group condition by another member of the same group of companies as the surrenderer.
This amount is then multiplied by the fraction A / B to give the amount which relates to the loss-making period, where:
A is the surrenderable amount attributable to the loss-making period, and
B is the total surrenderable amount for the surrender period.
Example
Company O is a consortium company, and owns 75% of Companies P and Q.
Company R is a consortium member and wants to claim group relief for carried-forward losses from Company O.
Company O has losses brought-forward £400,000, and £200,000 of this amount relates to the specified loss-making period.
Company P has £50,000 profits, and Company Q has profits of £75,000 against which it could claim group relief for carried-forward losses from Company O.
The group’s potential relief is £50,000 + £75,000 = £125,000.
This amount is multiplied by:
£200,000 (surrenderable amount attributable to loss-making period) £400,000 (total surrenderable amount for surrender period)
The maximum amount that Company O may surrender to Company R is £137,500.
| Description | Amount | Amount |
|---|---|---|
| Surrenderable amount for loss-making period | - | £200,000 |
| Group potential relief (£50,000 + £75,000) | £125,000 | - |
| Multiplied by A / B (£125,000 x (200,000 / 400,000)) | - | (£62,500) |
| Amount available to surrender | - | £137,500 |