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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Loan relationships: consortia companies and impairment: restriction of group relief for previous impairment debits

Group relief restriction based on earlier impairment relief

Where impairment debits have already been given for any previous period that began on or after 1 October 2002 in respect of loans to a consortium company, CTA09/S368 potentially restricts the amount of group relief that group members may claim in subsequent periods.

These past impairment losses are the total of net consortium debits (the excess of bad debts over recoveries) for earlier group accounting periods, less the reductions that were made to those debits for those periods under CTA09/S365(4). This is the ‘unreduced debits amount’.

This past impairment relief then potentially reduces the amount of group relief that may be claimed in the next succeeding period.

How the restriction works

In broad terms, group relief of a period is potentially restricted (but not below nil) by the amount of bad debt debits allowed in previous periods. However, the restriction is not applied to the whole group relief claim, only the ‘top slice’. That is, the amount (if any) by which the group relief claim exceeds the bad debt debits of the same period. This notional ‘slicing’ of the group relief claim is needed to maintain the statutory approach that

  • impairment relief is restricted in priority to group relief
  • group relief is only restricted as a last resort.


In the example at CFM35670, MC Ltd wrote off £40,000 of a loan to a consortium company and made a claim to group relief from the consortium company of £16,000. The debit for bad debts was reduced to £24,000 by the group relief claimed of £16,000.

In the following year, there is a further bad debt debit of £20,000 and a group relief claim of £38,000.

Restrict bad debts by group relief 

Section 365 reduces the bad debt debit to nil as the group relief claim exceeds £20,000.

Restrict group relief by earlier bad debts

Section 368 then reduces the group relief claim of £38,000. However, the restriction only applies to the top slice - the excess of

group relief claim £38,000
new bad debt debits £20,000

Cumulative past bad debt debits are £24,000; so group relief is reduced by the maximum amount, £18,000. The group relief claim is now £38,000 - £18,000 = £20,000.

Cumulative bad debt debits to carry forward and use in restricting group relief under section 363 in subsequent accounting periods are £24,000 - £18,000 = £6,000.

Overall result

Section 365 has reduced bad debt debits from £20,000 to nil.

Section 368 has reduced group relief from £38,000 to £20,000.


Y Imp’rm’t Adj imp’t Cum adj Cum net debits Group relief Adj group relief Total relief
1 40,000 24,000 16,000 24,000 16,000 16,000 40,000
2 20,000 nil 36,000 6,000 38,000 20,000 20,000