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HMRC internal manual

Company Taxation Manual

Corporation Tax loss: Group relief for carried-forward losses: Consortia: Restrictions on claims under conditions 1 or 2

CTA10/S188DB, CTA10/S188DH-DL

Where the claimant company is a company owned by the consortium, the amount of relief that can be given for group relief for carried-forward losses is limited to the lower of:

Claims must be given effect to in a certain order with other deductions of the same period. This order of relief is the same as for group relief for carried-forward losses within groups (CTA10/S188CK(6) to (8)) (CTM82100).

Ownership proportion

Claims under condition 1 (claimant company is owned by a consortium and surrendering company is a consortium member)

CTA10/S188DH

Where the claim is under condition 1, the amount of relief that can be claimed is also limited to the consortium member’s ownership proportion of the claimant’s relevant maximum profits during the overlapping period.

Ownership proportion is the lower of:

  • the proportion of the ordinary share capital beneficially owned by the surrendering company,
  • the proportion of the surrendering company’s beneficial entitlement of profit distribution to equity holders,
  • the proportion of the surrendering company’s beneficial entitlement to any assets on winding up, and
  • the proportion of the voting power directly owned by the surrendering company.

If any of the above proportions changes during the overlapping period, use the average proportion during that period (S188DH(4)).

CTA10/S188DI, CTA10/S188DJ

For claims relating to condition 2, the amount of relief that can be claimed is limited to the member of the consortium (link company)’s proportion of the claimant’s relevant maximum profits for the overlapping period (CTA10/S188DI).

Example 1

Company A owns 40% of Company B’s ordinary share capital including all rights attached to those shares. Company B is a company owned by a consortium, and Company A is a member of that consortium.

Company C is in the same group of companies as Company A, and wants to surrender group relief for carried-forward losses to Company B. Company A is the link company. All 3 companies have the same accounting period and therefore the same overlapping period.

Company B’s relevant maximum for the overlapping period is £400,000. Company C has £1,000,000 carried-forward post-1 April 2017 losses.

Company B’s claim from Company C is limited to the [## CTA10/S188DB, CTA10/S188DH-DL

Where the claimant company is a company owned by the consortium, the amount of relief that can be given for group relief for carried-forward losses is limited to the lower of:

Claims must be given effect to in a certain order with other deductions of the same period. This order of relief is the same as for group relief for carried-forward losses within groups (CTA10/S188CK(6) to (8)) (CTM82100).

Ownership proportion

Claims under condition 1 (claimant company is owned by a consortium and surrendering company is a consortium member)

CTA10/S188DH

Where the claim is under condition 1, the amount of relief that can be claimed is also limited to the consortium member’s ownership proportion of the claimant’s relevant maximum profits during the overlapping period.

Ownership proportion is the lower of:

  • the proportion of the ordinary share capital beneficially owned by the surrendering company,
  • the proportion of the surrendering company’s beneficial entitlement of profit distribution to equity holders,
  • the proportion of the surrendering company’s beneficial entitlement to any assets on winding up, and
  • the proportion of the voting power directly owned by the surrendering company.

If any of the above proportions changes during the overlapping period, use the average proportion during that period (S188DH(4)).

CTA10/S188DI, CTA10/S188DJ

For claims relating to condition 2, the amount of relief that can be claimed is limited to the member of the consortium (link company)’s proportion of the claimant’s relevant maximum profits for the overlapping period (CTA10/S188DI).

Example 1

Company A owns 40% of Company B’s ordinary share capital including all rights attached to those shares. Company B is a company owned by a consortium, and Company A is a member of that consortium.

Company C is in the same group of companies as Company A, and wants to surrender group relief for carried-forward losses to Company B. Company A is the link company. All 3 companies have the same accounting period and therefore the same overlapping period.

Company B’s relevant maximum for the overlapping period is £400,000. Company C has £1,000,000 carried-forward post-1 April 2017 losses.

Company B’s claim from Company C is limited to the](https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm80540) that Company A has of Company B. The amount of carried-forward losses that Company B can claim from Company C is limited to 40% of Company B’s relevant maximum.

Company B’s relevant maximum £400,000
   
40% of relevant maximum £160,000

 

Relief for the claim period is also limited to the amount that would be available to claim from the link company based on the ownership proportion (CTA10/S188DH) on the assumption that the link company and claimant company had the same accounting period (CTA10/S188DJ).

Example 2

Company E is a consortium company and Company D is a member of that consortium, holding 50% of the share capital and attached rights of E. Companies F and G are in the same group of companies as Company D.

All companies have the same accounting period.

Company E wants to claim group relief for carried-forward losses from Companies F and G. Based on the ownership proportion that Company D has of Company E, Company E can claim a total of 50% of its relevant maximum from Companies D, F and G combined.

Company E’s relevant maximum for the claim period is £500,000. The total of all claims based on consortium condition 2 from Companies D, E and F cannot exceed £250,000.

Company E’s relevant maximum £500,000
   
50% of relevant maximum £250,000

 

Claims under condition 1 or 2

Arrangements (CTA10/S188DK)

For claims relating to condition 1 or 2, if during any part of the overlapping period there are certain arrangements in place, the claimant company’s relevant maximum for the overlapping period is limited to 50% of what it otherwise would be under CTA10/S188DD.

For these purposes, arrangements are those which prevent a member of the consortium or link company (either alone or together with other consortium member companies) from controlling the claimant company, where it would otherwise control the company and which form part of a scheme with a main purpose of giving the claimant company a tax advantage.

Tax advantage takes its meaning from CTA10/S1139.

Claimant is in a group of companies (CTA10/S188DL)

If the claimant company is a member of a group of companies, then group relief takes precedence over consortium relief.  Therefore, the claimant company’s relevant maximum for the overlapping period is reduced by the group’s potential relief.

The group’s potential relief is the maximum amount of group relief (CTA10/PART 5) and group relief for carried-forward losses (CTA10/PART 5A) that the claimant could have claimed for the claim period based on the group condition. The group’s potential relief doesn’t include any losses or other amounts that have actually been claimed based on the group condition by another member of the same group of companies as the claimant.

Example

Company H is a consortium company, and owns 75% of Companies I and J.

Company K is a consortium member which owns 50% of Company H throughout the overlapping period. Company K wants to surrender group relief for carried-forward losses to Company H.

Company H has a relevant maximum of £200,000.

Company I has £50,000 current year losses, and Company J has carried-forward losses of £75,000, which Company H could claim group relief for against its profits.

The group’s potential relief is:

£50,000 + £75,000 = £125,000.

The reduced relevant maximum is therefore £75,000

The maximum amount that Company H may claim from Company K is £37,500.

Company H’s relevant maximum   £200,000
     
Group potential relief (£50,000 + £75,000) £125,000  
Reduced relevant maximum   £75,000
Amount available to claim (£75,000 x 50%)   £37,500