Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Compliance Handbook

From
HM Revenue & Customs
Updated
, see all updates

Penalties for Inaccuracies: Calculating the penalty: Potential lost revenue Corporation Tax Group Relief or S458 CTA10: Example of Group Relief ignored for PLR

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

A, B and C are a group of companies.

Their returned results are

Company A profits 50,000   less Group Relief 50,000
       
Company B loss (75,000)    
Company C profits 60,000   less Group Relief 25,000
Aggregate profit 35,000    

Company A’s return is found to contain a careless inaccuracy which is put right to produce a true profit of £85,000. Company B can, and does, withdraw its surrenders of £50,000 to Company A and £25,000 to Company C and replaces them with a surrender of £75,000 to Company A. Company A amends its Group Relief claim to £75,000.

As the inaccuracy did not have the affect of creating or increasing an aggregate loss recorded for the group, Group Relief is ignored in calculating the PLR for Company A.

Assuming liability at the small companies’ rate, the additional tax due and payable as a result of putting right the inaccuracy is as follows.

A Ltd Correct Original Additional
       
Trading income 85,000 50,000 35,000
Less Group Relief 75,000 50,000 25,000
Profits chargeable to CT 10,000   10,000
Tax at small companies’ rate (say 21%) 2,100   2,100
       
C Ltd Correct Original Additional
Trading income 60,000 60,000  
Less Group Relief   25,000 -25,000
Profits chargeable to CT 60,000 35,000 25,000
Tax at small companies’ rate (say 21%) 12,600 7,350 5,250

However the PLR for Company A’s penalty is calculated ignoring Group Relief

A Ltd Correct Original Additional
       
Trading income 85,000 50,000 35,000
Less Group Relief 75,000 50,000 (ignore 25,000)
Profits chargeable to CT 10,000   35,000
Tax at small companies’ rate (say 21%) 2,100   7,350
       
C Ltd Correct Original Additional
Trading income 60,000 60,000  
Less Group Relief   25,000 0
(ignore 25,000)      
Profits chargeable to CT 60,000 35,000  
Tax at small companies’ rate (say 21%) 12,600 7,350  

Total PLR = 7,350 + 0 = 7,350