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HMRC internal manual

Company Taxation Manual

Groups: group relief: example - surrender of trading losses

Company D and Company E both have accounting periods of 12 months to 31 December 2011.  Company D is a 75% subsidiary of Company E for all of that period.

The accounts and computations of the companies for the 12 months to 31 December 2011 show the following.

Company D  
Trading profits £3,000
Less losses brought forward (CTA10/S45) (£1,500)
CT trading income £1,500
Income from special leasing £500
Capital allowances in respect of special leasing (£800)
Non-trading loan relationship deficit (£600)
Company E  
Trading loss (£1,000)
Profits & gains from non-trading loan relationships £300

Company E claims relief in respect of its trading loss under CTA10/S37.

Company D claims relief in respect of its excess capital allowances under CAA01/S260(3).  It also claims, with the consent of Company E, the maximum amount of group relief that Company E can surrender (CTA10/S100).

The CT computations for the accounting period to 31 December 2011 are as follows.

Company D    
Trading income   £1,500
Special leasing income (£500 less CAs £500)   Nil
Excess capital allowances (£300)  
Non-trading loan relationship deficit (£600)  
Group relief claimed (£600) (£1,500)
CT profits   Nil         
Company E    
Trading income   Nil
Profits & gains from non-trading loan relationships   £300   
Trading loss CTA10/S37   (£300)
CT Profits   Nil
Losses to carry forward    
Trading loss   £1,000
Less utilised CTA10/S37 (£300)  
Surrendered via group relief (£600) (£900)  
Loss to carry forward   £100    

Company D may decide not to claim relief for excess capital allowances under CAA01/S260(3), and instead carry them forward under CAA01/S260(2).  If so, the group relief would still be restricted to £600.  This is because you have to take into account any relief available to the claimant company under CAA01/S260(3), whether it is claimed or not (CTM80400).

However if Company D’s trading profits were £4,000 instead of £3,000, Company E could have decided not to claim relief for itself of £300 of the trading loss generated in that year under CTA10/S37, and it would then have been able to surrender the whole of its trading loss, £1,000, as group relief.  This is because for trade losses there is no requirement that only the excess over other profits can be surrendered (CTM80115).

It is important to remember that the surrendering company may choose to surrender its trading losses of the period in full (or in part) without off-set against its own profits, where conversely the claimant company must reduce its available total profits by any loss in trade in the same accounting period, regardless of whether it claims such an amount (CTM80400).