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HMRC internal manual

Company Taxation Manual

Corporation tax: restriction on relief for carried-forward losses: maximum deductions allowance that can be allocated to a company

CTA10/S269ZV(4) to (6)

The group allowance allocation statement is submitted for the nominated company’s accounting period (CTM05180, CTM05200). The nominated company allocates the group deductions allowance (CTM05120) amongst companies listed on the statement.

A listed company’s accounting period for which part of the group deductions allowance has been allocated must fall wholly or partly into the nominated company’s accounting period.

Where a listed company is also the ultimate parent (CTM05160 and CTA10/S269ZZB(3)) of another group, it cannot also have a deductions allowance from the group for which it is the ultimate parent. (CTA10/S269ZV(5A))  For example, company A holds 75% of the ordinary share capital of company B which in turn owns 75% of the ordinary share capital of company C.  Companies A and B form a deductions allowance group (AB) and companies B and C form another one (BC).  The legislation at S269ZV(5A) prevents company B from obtaining a deductions allowance from the BC group as well as the AB group as it is the ultimate parent of C.

The maximum amount of group deductions allowance that can be allocated to an accounting period of a listed company is calculated using the following formula:

DAP / DNAP x GSA 

DAP is the number of days in the accounting period of the listed company that are both: 

  • Days in the accounting period the statement relates to (that is, the nominated company’s accounting period for which it is submitting the statement), and
  • Days on which the listed company was a member of the group and was not a member of any other group (CTA10/S269ZV(5A). 

DNAP is number of days in the nominated company’s accounting period, and 

GSA is the group deductions allowance for the nominated company’s accounting period.

In addition, an individual company’s total deductions allowance cannot be greater than £5 million per 12 month accounting period (CTA10/S269ZR(2), CTM05150).

Example

Company A has an accounting period ending 31 March 2019.

On 1 September 2019, Company A joins a group, group G, in which the nominated company is Company N.

Company N has a 12 month accounting period ending 31 December 2019. It was the nominated company for the whole of this period.

When Company N prepares the group allowance allocation statement for its accounting period ending 31 December 2019, it will need to calculate the maximum amount of the group deductions allowance that it can allocate to Company A.

Company A has two accounting periods which overlap with Company N’s accounting period ending 31 December 2019: the periods ending 31 March 2019 and 31 March 2020. However, Company A was not a member of group G for any part of its accounting period ending 31 March 2019, so it cannot be allocated any part of Group G’s group deductions allowance for this period.

For Company A’s accounting period ending 31 March 2020, the group must find the number of days in Company N’s accounting period ending 31 December 2019 during which Company A was a member of Group G.

  • Company A joined the group on 1 September 2019, giving 122 days from that date to 31 December 2019. This is DAP in the formula above.
  • The number of days in Company N’s 12 month accounting period ending 31 December 2019 is 365. This is DNAP.
  • Since Company N was the nominated company throughout the 12 month accounting period, the group deductions allowance for the period is £5 million. This amount is GSA.

DAP / DNAP x GSA = 122/365 x £5 million = £1,671,233.

This is the maximum amount of Group G’s group deductions allowance that can be allocated to Company A for the nominated company, Company N’s accounting period ending 31 December 2019.