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HMRC internal manual

Company Taxation Manual

Groups: group relief: meaning of trading loss

CTA10/S99(1)(a), CTA10/S100

Trading loss means a loss made in a trade in the surrender period (CTA10/S100(1)).

Trading losses can be surrendered and claimed as group relief (CTM80105).  The amount of the loss is computed in the same way as for CTA10/S37 (CTM04500 onwards).

Non-commercial losses, for which relief would not be available to the surrendering company under the loss relief rules (see CTM04600), are excluded from available losses.

There is no requirement that the loss should be used in any other way in priority to group relief.  Nor is the amount that can be surrendered restricted to the excess over other profits for the accounting period of surrender.  The surrendering company can choose to surrender anything up to the total amount of the trading loss within the surrender period – CTA10/S99(2)-(3).

There are additional conditions to be met in certain circumstances:

  • If the surrendering company is resident in another European Economic Area (EEA) territory there are a number of conditions that must be satisfied prior to group relief being given - see CTM81500 onwards.
  • In the case of a claim to consortium relief if the consortium owns the surrendering company - see CTM80570.

For the evidence you need in support of a claim in respect of trading losses, see CTM04570, and in the case of surrenders from EEA resident subsidiaries see CTM81500 onwards. It will usually be reasonable to demand a higher standard of evidence in group relief cases, including the submission of audited accounts. This is because the losses will often be claimed in full, and it is reasonable to expect the group to pay for the preparation of audited accounts, or accounts which have been subject to equivalent checks. Bear in mind that for CTSA accounting periods (CTM90110) a claim to group relief is not valid unless, at the time of the claim, the surrendering company has made its CTSA return and surrendered the losses (CTM97020).

For surrenders from EEA subsidiaries, if the conditions for such claims are satisfied, the claimant company is responsible for including a notice of consent from the surrendering company and ensuring that the claim has been computed correctly.