EGL63400 - Surrender of shortfall amounts: administration

As set out at EGL63000+, the EGL provisions allow in certain cases for one generating undertaking to surrender a shortfall amount to another generating undertaking.

For this to happen:

  • the surrendering undertaking needs to have consented to the surrender, and
  • the claimant undertaking needs to make a claim.

The EGL rules import the administrative provisions which apply to group relief, with certain necessary modifications (F(2)A23/S305).

The statutory references in the remainder of this page are to the paragraphs in FA1998/Sch18 (as they are applied for the purposes of EGL).

Claims

The claim must be made by the claimant undertaking in the lead company’s company tax return for the qualifying period in respect of which the claim is being made [para 67].

The claim must specify

  • the amount of the shortfall claimed [para 68(1)(a)], and
  • the name of the surrendering undertaking [para 68(1)(b)].

The claim may be made for less than the amount available for surrender at the time the claim is made [para 69(1)] but is ineffective if it exceeds the amount available [para 69(2)].

For these purposes, the amount available for surrender is calculated by [para 69(3)]:

  1. determining the total amount available for surrender on the basis of the information in the generating undertaking’s return and disregarding any pending amendments; and
  2. deducting the total of all amounts for which notices of consent have been given and not withdrawn.

A claim may be withdrawn by the claimant undertaking only by amending its company tax return [para 73].

Consents to surrender

The claim requires the consent of the surrendering undertaking [para 70(1) and F(2)A23/S299(9)].

The consent to surrender must be given [para 70(3)]:

  • by notice in writing,
  • to the officer of HMRC to whom the surrendering undertaking makes its company tax returns, and
  • at or before the time the claim is made.

A claim is ineffective unless it is accompanied by a copy of the notice of consent to surrender [para 70(4)].

The notice of consent must contain [para 71(1)]:

  • the name of the surrendering undertaking,
  • the name of the undertaking to which the shortfall is being surrendered,
  • the amount of the shortfall being surrendered,
  • the qualifying period of the surrendering undertaking to which the surrender relates, and
  • the overlap period to which the amount of shortfall relates.

Time limit for claims

The time limit for making claims for shortfall amounts follows that for making claims for group relief. So, in particular, a claim may be made or withdrawn at any time up to the latter of [para74(1)]:

  • the first anniversary of the filing date of the claimant undertaking’s company tax return,
  • where a notice of enquiry has been given into the return, 30 days after the enquiry is completed,
  • where after an enquiry HMRC amends the return, 30 days after the notice of amendment is issued,
  • where an appeal is brought against such an amendment, 30 days after the date on which the appeal is finally determined.

A claim may be made or withdrawn at a later time if HMRC allows it [para 74(2)].

Reduction in the amount available to surrender

The same approach taken for changes in group relief available to surrender apply for changes in the shortfall amount available to surrender, with the appropriate modifications. These, broadly, are:

  • The surrendering undertaking must within 30 days withdraw the notices of consent as necessary to bring the total amount surrendered with the new total amount available for surrender. It may give one or more new notices of consent. [Para 75(2)]
  • The company must give notice in writing of the withdrawal of consent and send copies of any new notices of consent to (i) each undertaking affected and (ii) HMRC [para 75(3)].
  • If the surrendering undertaking fails to act in this way, HMRC may by notice to the surrendering undertaking give directions as to which notices of consent are to be ineffective or are to have effect in a lesser amount [para 75(4)].
  • HMRC must at the same time send a copy of the notice to each claimant undertaking affected by this [para 75(5)].
  • A claimant undertaking must, so far as it may do so, amend its company tax return accordingly for the qualifying period for which the claim is made [para 75(6)].
  • The surrendering undertaking may within 30 days and in writing appeal against any directions issued to it by HMRC [para 75(7)/(8)].

Group undertakings

Where a generating undertaking is a group, anything to be done by (or to) the generating undertaking is to be done by (or to) the lead member of the group.

Tax returns for qualifying periods

References to the company tax return for a qualifying period are to the first accounting period of the company in question which ends on or after the end of the qualifying period.