Policy paper

Corporation Tax: simplifying link company requirements for consortium claims July 2015

Published 8 July 2015

Who is likely to be affected

Groups who hold shares in a UK consortium company through a group company resident outside the UK.

General description of the measure

Currently, for corporation tax group relief to flow between a consortium and a group owning a share in that consortium, the company that is a member of both the group and consortium (the ‘link company’) must be located in the UK or the European Economic Area (EEA) and, if in the EEA, must meet other requirements. This measure removes all requirements relating to the location of the ‘link company’ so that relief may flow regardless of where the link company is based.

Policy Objective

This measure makes the tax system simpler by removing any difference in treatment of consortium ‘link companies’ based in the UK and other jurisdictions.

Background to the measure

This measure was announced at Autumn Statement 2014.

This tax information and impact note (TIIN) updates and replaces the TIIN published on 10 December 2014.

Detailed proposal

Operative date

This measure will have effect for consortium claims to group relief for accounting periods beginning on and after 10 December 2014.

Current law

Claim and surrender of group relief can currently be made between a company with a share in a consortium (the ‘member of the consortium’) and the consortium company (the ‘company owned by a consortium’). Relief is also extended to companies in the same group as the member of the consortium.

Section 133 Corporation Tax Act (CTA) 2010 sets out the requirements for a claim for group relief between a company owned by a consortium and a company in the same group as a member of the consortium. The section defines the company that is in both the group and the consortium as the ‘link company’.

Subsections 133(1)(g) and (2)(g) require that the ‘link company’ must be in the UK or the EEA. Subsections 133(5) to (8) contain additional requirements where the ‘link company’ is in the EEA: all of the companies establishing the group relationship between the link company and the member of its group must also be within the EEA. If any of the intermediate companies are not in the EEA then group relief is not possible. Section 134A CTA 2010 defines ‘established in the EEA’ for the purposes of section 133.

Proposed revisions

Legislation will be introduced in Summer Finance Bill 2015 to omit subsections 133(1)(g) and 133(2)(g), as well as subsections 133(5) to (8). This will remove the requirements relating to the location of the ‘link company’ so that claims are possible under the conditions of section 133 regardless of the location of the ‘link company’. Section 134A will be redundant, so this will be omitted.

References to the omitted sections will be removed from sections 129 and 130 of CTA 2010.

Summary of impacts

Exchequer impact (£m)	2015 to 2016	2016 to 2017	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021
	negligible	negligible	negligible	negligible	negligible	negligible
	This measure is expected to have a negligible impact on the Exchequer.
Economic impact	The measure is not expected to have any significant economic impacts.
Impact on individuals, households and families	This measure concerns incorporated businesses and has no direct impact on individuals or households. This measure concerns multinational groups of companies so is not anticipated to have any impact on family formation, stability or breakdown.
Equalities impacts	This measure concerns the taxation of incorporated businesses, which have no protected characteristics in law. As such it is very unlikely that there will be any impact on equality.
Impact on business including civil society organisations	This measure will simplify the process for inward investors entering a consortium to trade in the UK by removing all requirements relating to the location of the 'link company'. This measure is expected to have a negligible impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs or other)	This measure is not expected to have any significant operational impacts.
Other impacts	Small and micro business assessment: this measure is expected to have a negligible impact on small and micro businesses. Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be subject to ongoing monitoring through information collected in tax returns.

Further advice

If you have any questions about this change, please contact Steven Mole on Telephone: 03000 585460, email:steven.mole@hmrc.gsi.gov.uk.