CREC072000 - Expenditure credit redemption: treatment of amounts surrendered to group members

Types of credit surrender

There are three different types of credit amount that companies may choose to surrender to a group as part of the expenditure credit redemption process. The company can choose to surrender: 

  • an amount of credit arising in the current accounting period, at Step 4 (CREC071600), 

  • an amount withheld at Step 2 in the current accounting period (CREC071400), 

  • an amount withheld at Step 2 in a previous accounting period and not used up at the pre-Step 1 restriction in the current accounting period (CREC071400). 

Group members 

An amount can only be surrendered by one company to another if both companies are members of the same group of companies. This applies to any type of amount surrendered. 

Two companies are members of the same group of companies if they meet the conditions in section 152 of the Corporation Tax Act (CTA) 2010: 

  • one is the 75% subsidiary of the other, or 

  • both are 75% subsidiaries of a third company. 

Please see CTM80151 for further guidance. 

Surrender rules 

There are specific rules governing how to use an amount surrendered by a group member. They apply in the same way to any type of amount surrendered. The legislation is in section 1179CE of CTA 2009. 

If the surrendering company and the receiving company have the same accounting period dates, the calculation is simple: the full amount of credit surrendered can be used by the receiving company to discharge its liability to Corporation Tax (CT). 

If the two companies do not have matching accounting period dates, the amount of surrender available is based on proportions. The surrendering company must follow these steps: 

  1. Select an overlapping accounting period (AP). An overlapping AP is any AP that covers some or all of the same days as the AP of the surrendering company. 

  2. Calculate the proportion of the overlapping AP that overlaps with the surrender AP. The surrender AP is the AP of the surrendering company in respect of which it makes the surrender. 
    Apply the proportion to the amount of CT payable by the receiving company for that overlapping AP. 

  3. Calculate the proportion of the surrender AP that overlaps with the overlapping AP, and apply that proportion to the surrendered amount. 

  1. The amount given by step 3 is used to discharge the liability of the receiving company to pay the CT mentioned in step 2, up to the amount given by that step. 

  2. Select another overlapping AP, if there is one, and repeat steps 2 to 4. 

Discharging CT liability 

Amounts received from a group member and used to discharge CT liability must be used at the pre-Step 1 restriction (CREC071100). They cannot be used at any other Step.  

Excess surrendered amounts 

In some cases, the surrendered amount may exceed the amount that can be used by the receiving company. If this occurs, the excess amount is treated as if it was never surrendered. 

If the excess amount was initially surrendered at Step 4, the company should surrender it to a different group member or carry it forward to the later Steps in section 1179CC CTA 2009. If it was surrendered having previously been withheld at Step 2, the company should surrender it to a different group member or carry it forward to the next accounting period (CREC071400).


Example 1 

Company 1 chooses to surrender £100,000 of credit at Step 4 to Company 2, which is in the same group. Company 1’s ‘surrender AP’ is the 12-month period from 1 January 2025 to 31 December 2025. 

Company 2 has two ‘overlapping APs’: 1 April 2024 to 31 March 2025 (OAP 1), and 1 April 2025 to 31 March 2026 (OAP 2). Company 2’s CT liability is £200,000 in OAP 1, and £80,000 in OAP 2. 

  1. Company 1 chooses OAP 1 as the first overlapping AP. 

  2. For OAP 1, the proportion that overlaps with the surrender AP is ¼ (3 months of a 12-month AP). Apply this proportion to the CT liability for OAP 1: ¼ of £200,000 = £50,000. 

  3. The proportion of the surrender AP that overlaps with OAP 1 is also ¼. Apply this proportion to the surrendered credit amount: ¼ of £100,000 = £25,000. 

  4. The £25,000 from step 3 is used to discharge the £50,000 from step 2. Company 2’s CT liability for OAP 1 is partially discharged and reduced to £25,000. There is £75,000 of Company 1’s credit left to surrender. 

  5. Company 1 chooses OAP 2 as the next overlapping AP. It applies steps 2 to 4 again: 
     
    The proportion that overlaps with the surrender AP is ¾ (9 months of a 12-month AP). Apply this proportion to the CT liability of OAP 2: ¾ of £80,000 = £60,000. 
     
    The proportion of the surrender AP that overlaps with OAP 2 is also ¾. Apply this proportion to the surrendered credit amount: ¾ of £100,000 = £75,000. 
     
    The £75,000 is used to discharge the £60,000. Company 1 still has £15,000 credit left. 

There are no more overlapping APs. The unused £15,000 is treated as if it were not surrendered. Company 1 will therefore have £15,000 more credit remaining to use at Step 5. 

Example 2 

Company 3 chooses to surrender £30,000 credit to Company 4. The £30,000 was withheld at Step 2 for company 3. The two companies have matching AP dates: 1 July 2024 to 30 June 2025. 

Company 4 has a CT liability of £20,000 for the AP. Because the APs overlap completely, the full amount of credit surrendered can be used to discharge the full amount of CT liability. 

Company 4’s CT liability is fully discharged and reduced to nil, leaving £10,000 of the surrendered amount unused. The excess £10,000 is treated as if it was never surrendered. As it is a Step 2 amount, Company 3 can either surrender it to a different group member, if one is available, or carry it forward to the next accounting period.