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HMRC internal manual

Corporate Finance Manual

Loan relationships: consortia companies and impairment: amount of restriction: example

Example: restriction: net consortium debit

Porwin Ltd is a consortium company owned

  • 50% by Ulla (South) Ltd
  • 50% by Rewdon Manufacturing Ltd.

Ulla group

Ulla (South) Ltd and Ulla (North) Ltd are members of the Ulla group of companies.

Year 1 

Ulla (South) Ltd lends Porwin Ltd £30,000. Ulla (North) lends it £60,000. Ulla plc lends £100,000 and writes this down by £50,000. This is an impairment loss.

The net consortium debit is £50,000.

Year 2 

Ulla (South) Ltd writes down £20,000 of its loan. Ulla (North) Ltd writes down £40,000, while Ulla plc reduces its provision for impairment by £15,000.

The net consortium debit for the Ulla group in Year 2 is

Written off £60,000
Impairment reduction credit £15,000
Net consortium debit £45,000

Rewdon group

Rewdon Manufacturing Ltd is a member of the Rewdon group.

Year 1 

In this year, Rewdon Manufacturing Ltd made a loan of £100,000 to Porwin Ltd. It has written it down to £40,000, charging an impairment debit of £60,000. No other member of the Rewdon group has made a loan to Porwin Ltd.

The net consortium debit for the group for this year is £60,000.

Year 2 

There were no impairment losses or reversals.

The amount of the group relief restriction

The amount of the bad debt restriction hinges on the group relief that each consortium member, or members of its group, claims from the consortium company.

So if, in Year 1, Porwin Ltd (owned 50% by Ulla (South) Ltd and 50% by Rewdon Manufacturing Ltd) has losses of £102,000 available to surrender, the maximum amount of group relief that the Ulla group can claim, under CTA10/S143, is the smaller of

  • 50% of the loss available to surrender (£51,000)
  • the amount of total profits as reduced by any other relief.

The same rules apply to the Rewdon group.