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HMRC internal manual

Corporate Finance Manual

Old rules: loan relationships: consortia and bad debts: carry forward of group relief

Carry forward of group relief

This guidance applies to periods of account beginning before 1 January 2005 

Whenever there was a group relief claim but no debits for bad debts (after any reduction in bad debts brought about under sub paragraph 5A(6)) in the group accounting period, FA96/SCH9/PARA5A(14) ensured that the amount of that group relief claim was taken into account when considering subsequent restrictions under Para 5A(6). This catered for situations where the claimant made a group relief claim but deferred charging the corresponding bad debt debit to a later year.

In Example at CFM81390, WD Ltd wrote off £100,000 of a £200,000 loan to a consortium company in Year 1. This debit was restricted to £68,000 because of a group relief claim of £32,000.

In Year 2 there was a group relief claim of £130,000 but no bad debt debit.

In the following period (Year 3) there was no group relief claim, but there was a bad debt debit of £70,000.

Year 2

Para 5A(12) and (13) reduced the group relief claim to £62,000 by past bad debt relief given of £68,000. That reduced group relief claim would have been allowed, but because there was no relevant net debit in the year, this sum would also have been also carried forward under Para 5A(14). It would have been treated as group relief of the following period for the purposes of Para 5A(6) only.

Year 3

Para 5A(6) reduced the bad debt debit by group relief. Here there was no group relief claim of the year, but group relief of £62,000 would have been carried forward under Para 14. The bad debt debit would have been restricted by £62,000, leaving a relievable debit of £8,000.