Commentary

D2.263 Group relief—EEA resident company losses

Corporate tax
Corporate tax | Commentary

D2.263 Group relief—EEA resident company losses

Corporate tax | Commentary

D2.263 Group relief—EEA resident company losses

Since 1 April 2006, a non-UK resident company that is resident or carrying on a trade in the European Economic Area (EEA) can surrender certain losses to a UK parent company or a UK resident 75% subsidiary of the UK parent company provided certain qualifying conditions are met1. It is, however, important to note that these provisions do not apply to consortia; consortium claims can only be made between UK resident companies (or a non-UK resident company within the charge to corporation tax (prior to 5 July 2016 this second condition was a non-UK resident company trading in the UK through a permanent establishment)). Neither do these provisions apply to group claims for carried forward losses.

EEA resident company losses—qualifying conditions

The loss or other amount is not available for surrender by way of group relief unless it meets the following four conditions2:

  1.  

    •     the equivalence condition

  2.  

    •     the EEA tax loss condition

  3.  

    •     the qualifying loss condition, and

  4.  

    •     the precedence condition

The UK claimant company is responsible for demonstrating that the losses meet the relevant conditions3 at the time the relevant claim for group relief is made4. The Supreme Court rejected HMRC's contention that the relevant date was the end of the accounting period in which the losses crystallised. Where the conditions are met, the foreign loss must be recomputed in accordance with UK tax rules.

Equivalence condition

An amount meets the equivalence condition if it corresponds to an amount that would be available for surrender

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