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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Groups: group relief: non coinciding accounting periods or group relationships - use of management accounts


Where a company ceased to be a member of a group by reason of its or its parent’s sale, management accounts will often have been specially drawn up for the purpose of the sale.  In such cases, you should ask the agents whether management accounts were drawn up.  If they were, they may be taken as the starting point for an accounts-based apportionment of the amount of profit to claim against or loss to surrender for group relief before and after the sale.

Where there are no management accounts or similar evidence it may be fairly straightforward to apportion some or all of the income, gains or balancing charges to the relevant period, particularly where asset disposals have been infrequent, and apportion the remainder of them and the deductible items (for example overheads) on a time basis.  This hybrid basis may be accepted if it is considered to give a fair result, or a more precise method would have no impact for group relief purposes.

An example of where the allocation of the remainder of expenses on a time basis would give a fair result is where the level of the company’s activity remains much the same after the change as before.

Where the business is run down following disposal of assets, however, or there is a significant administrative change, it will be preferable to apportion deductions on the accounts basis.  An example of a significant administrative change is where costs previously incurred directly by the company are replaced by management charges made by another company in the new group.