CFM35640 - Loan relationships: consortia companies and impairment: amount of restriction

CTA09/S365

Amount of restrictio

Chapter 7 sets out rules to ensure that consortia companies cannot, in effect, obtain double tax relief for the same loss.

The rules require a comparison of

• the total impairment losses and release debits brought into account in respect of all the relevant creditor relationships of the consortium member and all the companies in its group, and
• the total credits brought into account by the debtor companies in the group in respect of those relevant creditor relationships.

If the debits are greater than the credits, the excess is the ‘net consortium debit’.

When there is a net consortium debit, and group relief is claimed by the consortium member or the other companies in the consortium member's group, the impairment debits and release debits (called the ‘relevant debits’) are reduced. The amount of the reduction is calculated in two steps:

Step 1:  find the total amount of group relief which

• may be surrendered by the debtor consortium companies, and
• is claimed by the creditor company or any of its group members for the group accounting period

Step 2:

• If the amount found at Step 1 does not exceed the net consortium debit, apportion the amount found at Step 1 between the relevant debits in proportion to their respective amounts.
• If the amount found at Step 1 exceeds the net consortium debit, apportion to their respective amounts.

Where CTA10/S143 applies to limit the amount of a consortium claim, S143 has priority.