CTM34600 - Residence: dual resident companies: anti-avoidance - limitation of group relief

Losses or other amounts are not available for set-off under the group relief provisions if the company that would be the surrendering company is a dual resident investing company.  Group relief is denied in respect of amounts listed at CTA10/S99 (1), namely

  • a trading loss,
  • a capital allowance excess,
  • a non trading loan relationships deficit,
  • amounts allowable as qualifying charitable donations,
  • a UK property business loss,
  • management expenses, and
  • a non-trading loss on intangible fixed assets.

Example

A, B and C are companies in a multinational group.

Company A is UK incorporated and UK resident.

Company B is a dual resident investing company and is US incorporated and UK resident.

Company C is US incorporated and US resident.

Company A and Company B are members of a UK sub-group.

Company B and Company C are members of a US sub-group.

Company A and Company C each have profits of £100.

Company B has a loss of £100.

In the past years Company B could set its loss against Company A's profits, as well as against Company C's profits (and so obtain relief of £200 altogether).

Under CTA10/S109 (2) Company B's loss is not available for set-off against Company A's profits.

From 1 April 2017, similar rules apply to group relief for carried-forward losses at CTA10/S188BJ.