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HMRC internal manual

Company Taxation Manual

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Consortia: group relief: amount of relief: claimant is a member of the consortium: claims based on consortium condition 1

CTA10/S143

CTA10/S143 applies where a member of a consortium is claiming from a company owned by a consortium. For guidance on situations where the member of a consortium is surrendering to a company owned by a consortium see CTM80545.

The amount of relief which a member of a consortium may claim against its profits for the overlapping period (CTM80225) from a company owned by the consortium is limited to the ownership proportion of the loss or other amount available for relief for that period.

See the example at CTM80670.

The ownership proportion is the lowest of the following percentages:

  • the percentage holding of the ordinary share capital of the surrendering company beneficially owned by the member of the consortium,
  • the member’s percentage entitlement to profits available for distribution by the surrendering company to its equity holders,
  • the member’s percentage entitlement to assets available for distribution by the surrendering company to its equity holders on a notional winding-up,
  • the percentage of voting rights in the surrendering company directly possessed by the member of the consortium (for claims for accounting periods beginning on or after 12 July 2010).

The detailed rules on the first three percentages are in CTA10/Part 5/Chapter 6. They apply as in CTM81000 onwards, but read any reference to:

  • ‘parent company’ as a reference to ‘member of the consortium’, and
  • ‘subsidiary company’ as a reference to ‘company owned by the consortium’.

The percentages are based on entitlement and possession in the overlapping period (CTM80225) of the member of the consortium and the surrendering company. Where any of the percentages has varied in the overlapping period, the average percentage is taken (CTA10/S143(4)(b)). The average has to be weighted for time. For example:

  • nine months at 60% is (9/12 x 60% =) 45%, plus
  • three months at 40% is (3/12 x 40% =) 10%,

gives an average of 55%.

Because the lowest of four percentage figures is taken for each member of the consortium, the application of the above rules means that the total of all the members’ ownership proportions will not necessarily add up to 100%. The difference between the aggregate percentage and 100% is not available for consortium relief.

Whichever measure is used (share capital, entitlement to profits, etc) the proportion or percentage should be based on the total of that measure that is held in the surrendering company, so including all equity holders whether or not they are members of the consortium. As an example, CTA10/S153(1)(b) only requires 75% of the ordinary share capital to be beneficially owned by other companies; were the other 25% owned by non-corporate shareholders then those non-corporate shareholders would not be able to make a consortium claim (CTM80530), but that 25% holding would still need to be factored in when looking at the proportion of ordinary share capital owned by the members of the consortium who could make a claim.

For claims for accounting periods beginning on or after 12 July 2010, CTA10/S143 is subject to S146A. This applies where arrangements are in place to prevent the member of the consortium from controlling the surrendering company, and the main purpose, or one of the main purposes of the arrangements is to enable the member of the consortium to gain a tax advantage (CTM80587).