INTM561280 - Hybrids: allocation of DII within a group: condition D

There is a time during the overlapping period where Company A and Company B are both within the charge to corporation tax

• If for part of the overlapping period Company A is not within the charge to corporation tax, that part is excluded from the overlapping period, but remains part of the surplus period.
• If for part of the overlapping period Company B is not within the charge to corporation tax, that part is excluded from the overlapping period, but remains part of the shortfall period.

For example, Company A has an accounting period of 1 January 2023 to 31 December 2023 in which it has a DII surplus (its surplus period).

Company B has an accounting period of 1 April 2022 to 31 March 2023 in which it has a DII shortfall (its shortfall period).

The overlapping period is 1 January 2023 to 31 March 2023.

If Company A was not within the charge to corporation tax for the duration of January 2023, that month would remain part of Company A’s surplus period (1 January to 31 December 2023), but be excluded from the overlapping period, which becomes 1 February 2023 to 31 March 2023.

Similarly, if Company B was not within the charge to corporation tax for the duration of March 2023, that month would remain part of Company B’s shortfall period (1 April 2022 to 31 March 2023), but be excluded from the overlapping period, which now becomes 1 February 2023 to 28 February 2023.

In each case, Condition D is still met.