Group loss relief

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Group loss relief
  • Reforms to corporation tax loss relief
  • Definition of ‘group’ for group relief purposes
  • Sub subsidiaries
  • Available amounts
  • Payments for group relief
  • Overseas companies
  • Effective use of losses
  • Trapped losses
  • Maximum relief
  • Non-coterminous accounting periods
  • Company joining / leaving a group
  • Arrangements for transfers of companies
  • Accelerated payments and group loss relief

This document covers these rules in detail, along with the surrenderable amounts; payments; overseas companies; effective use of losses; trapped losses; maximum relief; Non-coterminous periods; company joining/leaving a group; transfer arrangements; commercial arrangements with public authorities; accelerated payments; and group relief restriction.

 

Group relief allows losses to be surrendered from loss-making companies to profitable companies in the same 75% group. The maximum claim is the lower of either:

  • the available loss
  • the available profit

In addition, there are rules allowing the allocation of capital gains and losses to other group members. The definition of a ‘group’ is slightly different for group gains purposes. For information on this, see the Group gains guidance note.

Reforms to corporation tax loss relief

Reforms to corporation tax loss relief were included in Finance (No 2) Act 2017. The changes introduced more flexibility for the utilisation of losses carried forward and also the ability to group relief carried forward losses. In addition, a restriction was introduced such that only 50% of profits in excess of £5 million can be offset by losses brought forward.

For accounting periods beginning on or after 1 April 2017, or straddling 1 April 2017, the additional relaxation allowing group relief for carried-forward losses and the related 50% restriction to that relief are dealt with in detail in the following guidance notes and related worked examples:

  • Group relief for carried-forward losses
  • Carried-forward losses restriction

It should be noted that additional anti-avoidance provisions have been introduced specifically to protect against abuse of this and other relaxations that also impact most existing loss provisions. An overview of anti-avoidance provisions is contained in the above guidance notes.

The commentary set out below in this guidance note deals with relief for current year losses and the general framework of group relief applicable to periods before and after 1 April 2017.

Definition

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