Finance (No. 2) Bill (HL Bill 156)

Finance (No. 2) BillPage 300

the amount (or a corresponding amount) is or has been deductible or
otherwise allowable for tax purposes in the United Kingdom.

(7) The amount is to be treated as deductible or otherwise allowable for
the purposes of the non-UK tax chargeable under the law of the
5territory concerned if (and only if) the surrendering company is
treated as resident in that territory for the purposes of the non-UK
tax.

(8) In this section and section 188BH

  • “the loss-making period”, in relation to a loss or other amount,
    10means the accounting period in which the loss was made or
    the amount arose,

  • “non-UK tax” has the meaning it has in Part 5 (see section 187),
    and

  • “non-UK profits” has the meaning given by section 108.

188BH 15 Restriction on surrender of losses made when non-UK resident

(1) This section applies in relation to a loss or other amount carried
forward to the surrender period if during the loss-making period the
surrendering company was a non-UK resident company—

(a) carrying on a trade of dealing in or developing UK land, or

(b) 20carrying on a trade in the United Kingdom through a
permanent establishment.

(2) If the surrendering company was established in the EEA during the
loss-making period, it may surrender the loss or other amount under
this Chapter only so far as conditions A and B are met.

25Subsection (8) imposes restrictions on a surrender under this
subsection.

(3) In any other case, the surrendering company may surrender the loss
or other amount under this Chapter only so far as conditions A, B
and C are met in relation to the loss or amount.

(4) 30Condition A is that the loss or other amount is attributable to
activities of the surrendering company in respect of which it is
within the charge to corporation tax for the loss-making period.

(5) Condition B is that the loss or other amount is not attributable to
activities of the surrendering company that are double taxation
35exempt for the loss-making period (within the meaning given by
section 186).

(6) Condition C is that—

(a) the loss or other amount does not correspond to, and is not
represented in, an amount with subsection (7), and

(b) 40no amount brought into account in calculating the loss or
other amount corresponds to, or is represented in, an amount
within subsection (7).

(7) An amount is within this subsection if, for the purposes of non-UK
tax chargeable under the law of a territory, the amount is or at any
45time has been (in any period) deductible from or otherwise allowable
against non-UK profits of any person.

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(8) A loss or other amount may not be surrendered by virtue of
subsection (2) if and to the extent that it, or any amount brought into
account in calculating it, corresponds to, or is represented in,
amounts within subsection (9).

(9) 5An amount is within this subsection if, for the purposes of non-UK
tax chargeable under the law of a territory, the amount has (in any
period) been deducted from or otherwise allowed against non-UK
profits of any person.

(10) But an amount is not to be taken to be within subsection (7) or (9) by
10reason only that it is—

(a) an amount of profits brought into account for the purpose of
being excluded from non-UK profits of the person, or

(b) an amount brought into account in calculating an amount of
profits brought into account as mentioned in paragraph (a).

(11) 15Subsection (12) applies for the purposes of subsection (7) if, in order
to determine if an amount is or at any time has been deductible or
otherwise allowable for the purposes of non-UK tax chargeable
under the law of a territory, it is necessary under that law to know if
the amount (or a corresponding amount) is or at any time has been
20deductible or otherwise allowable for tax purposes in the United
Kingdom.

(12) The amount is to be treated as deductible or otherwise allowable for
the purposes of the non-UK tax chargeable under the law of the
territory concerned.

(13) 25For the purposes of this section a company is established in the EEA
if—

(a) it is constituted under the law of the United Kingdom or an
EEA territory, and

(b) it has its registered office, central administration or principal
30place of business within the European Economic Area.

(14) In subsection (13) “EEA territory”, in relation to any time, means a
territory outside the United Kingdom that is within the European
Economic Area at that time.

188BI Restriction on surrender losses etc made when dual resident

35The surrendering company may not surrender a loss or other
amount under this Chapter if the company was not eligible to
surrender the loss or other amount under Chapter 2 of Part 5 by
reason of section 109 (restriction on losses etc surrenderable by dual
resident).

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CHAPTER 3 Claims for group relief for carried-forward losses
Introduction
188CA Overview of Chapter

This Chapter sets out how a company may claim group relief for
5carried-forward losses and how the relief is given.

Claiming group relief for carried-forward losses
188CB Claims in relation to all the surrenderable amounts

(1) This section applies in relation to the surrendering company’s
surrenderable amounts for the surrender period under Chapter 2.

(2) 10If the requirements in subsection (3) are met, a company (“the
claimant company”) may make a claim for group relief for carried-
forward losses for an accounting period (“the claim period”) in
relation to the surrenderable amounts.

(3) The requirements are as follows—

15Requirement 1

The surrendering company consents to the claim.

Requirement 2

There is a period (“the overlapping period”) that is common to the
claim period and the surrender period.

20Requirement 3

At a time during the overlapping period—

  • the group condition is met (see section 188CE)

  • consortium condition 1 is met (see section 188CF), or

  • consortium condition 2 is met (see section 188CG).

(4) 25A claim under this section may relate to the whole of the
surrenderable amounts or to part of them only.

(5) This section is subject to section 188CD (claim not allowed by
company with unused carried-forward losses of its own).

188CC Claims in relation to the surrenderable amounts that are attributable
30to a specified accounting period

(1) This section applies in relation to the surrendering company’s
surrenderable amounts for the surrender period under Chapter 2.

(2) If the requirements in subsection (3) are met, a company (“the
claimant company”) may make a claim for group relief for carried-
35forward losses for an accounting period (“the claim period”) in
relation to the surrenderable amounts that are attributable to an
accounting period of the surrendering company specified in the
claim (“the specified loss-making period”).

(3) The requirements are as follows—

40Requirement 1

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The surrendering company consents to the claim.

Requirement 2

There is a period (“the overlapping period”) that is common to the
5claim period and the surrender period.

Requirement 3

Consortium condition 3 (see section 188CH) or consortium condition
4 (see section 188CI) is met throughout a period which—

  • begins before or during the specified loss-making period, and

  • 10ends during or after the overlapping period.

(4) A claim under this section may relate to the whole of the
surrenderable amounts attributable to the specified loss-making
period or to part of them only.

(5) This section is subject to section 188CD (claim not allowed by
15company with unused carried-forward losses of its own)

188CD Claim not allowed by company with unused carried-forward losses
of its own

A company may not make a claim for group relief for carried-
forward losses for an accounting period if—

(a) 20any amount carried forward to that period under any
provision mentioned in section 188BB(1), or any amount
which is carried forward to that period and falls within
section 124B(1)(b) of FA 2012, is not deducted in full from the
total profits of the company for that period at Step 2 of section
254(2),

(b) the company makes a claim under section 458(1) of CTA 2009
for any amount of a deficit to be excepted from being set off
against profits of that period,

(c) the company makes a claim under section 45(4A) that the
30profits of a trade of that period are not to be reduced or are
not to be reduced by more than a specified amount, or

(d) the company makes a claim under section 45B(5) for relief not
to be given in that period for an amount of a loss or for a
specified part of an amount of a loss.

188CE 35 The group condition

(1) The group condition is met if the surrendering company and the
claimant company—

(a) are members of the same group of companies, and

(b) are both UK related.

(2) 40For the meaning of “UK related” in subsection (1)(b) and in sections
188CF to 188CI, see section 188CJ.

188CF Consortium condition 1

(1) Consortium condition 1 is met if—

(a) the claimant company is a trading company or a holding
45company,

(b) the claimant company is owned by a consortium,

(c) the surrendering company is a member of the consortium,
and

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(d) both companies are UK related.

(2) But consortium condition 1 is not met if a profit on a sale within
subsection (3) by the surrendering company would be a trading
receipt of the surrendering company.

(3) 5A sale is within this subsection if it is a sale of—

(a) the share capital the surrendering company owns in the
claimant company, or

(b) if the claimant company is owned by the consortium as a
result of section 153(3) (consortiums involving holding
10companies), the share capital the surrendering company
owns in the holding company in question.

188CG Consortium condition 2

(1) Consortium condition 2 is met if—

(a) the claimant company is a trading company or a holding
15company,

(b) the claimant company is owned by a consortium,

(c) the surrendering company is not a member of the
consortium,

(d) the surrendering company is a member of the same group of
20companies as a third company (“the link company”),

(e) the link company is a member of the consortium,

(f) the surrendering company and the claimant company are
both UK related.

(2) But consortium condition 2 is not met if a profit on a sale within
25subsection (3) by the link company would be a trading receipt of that
company.

(3) A sale is within this subsection if it is a sale of—

(a) the share capital the link company owns in the claimant
company, or

(b) 30if the claimant company is owned by the consortium as a
result of section 153(3) (consortiums involving holding
companies), the share capital the link company owns in the
holding company in question.

188CH Consortium condition 3

(1) 35Consortium condition 3 is met if—

(a) the surrendering company is a trading company or a holding
company,

(b) the surrendering company is owned by a consortium,

(c) the claimant company is a member of the consortium, and

(d) 40both companies are UK related.

(2) But consortium condition 3 is not met if a profit on a sale within
subsection (3) by the claimant company would be a trading receipt of
the claimant company.

(3) A sale is within this subsection if it is a sale of—

(a) 45the share capital the claimant company owns in the
surrendering company, or

Finance (No. 2) BillPage 305

(b) if the surrendering company is owned by the consortium as
a result of section 153(3) (consortiums involving holding
companies), the share capital the claimant company owns in
the holding company in question.

188CI 5 Consortium condition 4

(1) Consortium condition 4 is met if—

(a) the surrendering company is a trading company or a holding
company,

(b) the surrendering company is owned by a consortium,

(c) 10the claimant company is not a member of the consortium,

(d) the claimant company is a member of the same group of
companies as a third company (“the link company”),

(e) the link company is a member of the consortium, and

(f) the claimant company and the surrendering company are
15both UK related.

(2) But consortium condition 4 is not met if a profit on a sale within
subsection (3) by the link company would be a trading receipt of that
company.

(3) A sale is within this subsection if it is a sale of—

(a) 20the share capital the link company owns in the surrendering
company, or

(b) if the surrendering company is owned by the consortium as
a result of section 153(3) (consortiums involving holding
companies), the share capital the link company owns in the
25holding company in question.

188CJ Meaning of “UK related” company

For the purpose of sections 188CE to 188CI a company is UK related
if—

(a) it is a UK resident company, or

(b) 30it is a non-UK resident company carrying on a trade in the
United Kingdom through a permanent establishment.

Giving group relief for carried-forward losses
188CK Deductions from total profits

(1) If a claimant company makes a claim under section 188CB or 188CC,
35the group relief for carried-forward losses is given by the making of
a deduction from the claimant company’s total profits of the claim
period.

(2) In the case of a claim under section 188CB, the amount of the
deduction under subsection (1) is—

(a) 40an amount equal to the surrendering company’s
surrenderable amounts for the surrender period, or

(b) if the claim is in relation to only part of those amounts, an
amount equal to that part.

(3) Subsection (2) is subject to—

(a) 45subsections (6) to (9),

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(b) the limitations set out in Chapter 4, and

(c) section 269ZD (restriction on deductions from total profits).

(4) In the case of a claim under section 188CC, the amount of the
deduction under subsection (1) is—

(a) 5an amount equal to the surrendering company’s
surrenderable amounts for the surrender period that are
attributable to the specified loss-making period, or

(b) if the claim is in relation to only part of those amounts, an
amount equal to that part.

(5) 10Subsection (4) is subject to—

(a) subsections (6) to (9),

(b) the limitations set out in Chapter 5, and

(c) section 269ZD (restriction on deductions from total profits).

(6) A deduction under subsection (1) is to be made—

(a) 15before deductions for relief within subsection (7), but

(b) after all other deductions to be made at Step 2 in section 4(2)
(apart from deductions for group relief for carried-forward
losses on other claims).

(7) The deductions within this subsection are deductions for relief—

(a) 20under section 37 in relation to a loss made in an accounting
period after the claim period,

(b) under section 260(3) of CAA 2001 in relation to capital
allowances for an accounting period after the claim period,
and

(c) 25under section 389 or 463B of CTA 2009 in relation to a deficit
of a deficit period after the claim period.

(8) For the purposes of subsection (6)(b) it is to be assumed that the
claimant company has claimed all relief available to it for the claim
period under section 37 of this Act or section 260(3) of CAA 2001.

(9) 30Corporation tax relief is not to be given more than once for the same
amount, whether—

(a) by giving group relief for carried-forward losses and by
giving some other relief (for any accounting period) to the
surrendering company, or

(b) 35by giving group relief for carried-forward losses more than
once.

CHAPTER 4 Limitations on relief: claims under section 188CB
Introduction
188DA Overview

40This Chapter sets out limitations on the amount of relief which may
be given on a claim under section 188CB.

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General limitation on amount of relief
188DB Limitation on amount of relief applying to all claims under section
188CB

(1) The amount of group relief for carried-forward losses to be given on
5a claim under section 188CB (“the current claim”) is limited to
whichever is the lesser of—

(a) the amount mentioned in subsection (2), and

(b) the amount mentioned in subsection (3).

(2) The amount referred to in subsection (1)(a) is the unused part of the
10surrenderable amounts (see section 188DC).

(3) The amount referred to in subsection (1)(b) is the difference
between—

(a) the claimant company’s relevant profits for the overlapping
period (see section 188DD), and

(b) 15the amount of previously claimed group relief for carried-
forward losses for the overlapping period (see section
188DE).

188DC Unused part of the surrenderable amounts

(1) The unused part of the surrenderable amounts is the amount equal
20to—

(a) the surrenderable amount for the overlapping period (see
subsection (2)), less

(b) the amount of prior surrenders for that period (see
subsections (3) to (5)).

(2) 25To determine the surrenderable amount for the overlapping
period—

(a) take the proportion of the surrender period included in the
overlapping period, and

(b) apply that proportion to the surrenderable amounts for the
30surrender period.

The surrenderable amount for the overlapping period is the amount
given as a result of paragraph (b).

(3) To determine the amount of prior surrenders for the overlapping
period—

(a) 35identify any prior claims for the purposes of this section (see
subsection (4)), and

(b) take the steps set out in subsection (5) in relation to each such
claim.

The amount of prior surrenders for the overlapping period is the
40total of the previously used amounts given at Step 3 in subsection (5)
for all the prior claims.

(4) A claim is a prior claim for the purposes of this section if—

(a) it is either—

(i) a claim under section 188CB by any company which
45relates to the same amounts as the current claim, or

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(ii) a claim under section 188CC by any company which
relates to amounts included in the amounts to which
the current claim relates,

(b) it is made before the current claim, and

(c) 5it has not been withdrawn.

(5) These are the steps referred to in subsection (3)(b) to be taken in
relation to each prior claim.

Step 1

Identify the overlapping period for the prior claim.

10Step 2

Identify any period that is common to the overlapping period for the
current claim and the overlapping period for the prior claim.

If there is a common period, go to Step 3.

If there is no common period, there is no previously used amount in
15relation to the prior claim (and ignore Step 3).

Step 3

Determine the previously used amount of group relief for carried-
forward losses in relation to the prior claim (see subsection (6)).

(6) To determine the previously used amount of group relief for carried-
20forward losses in relation to a prior claim—

(a) take the proportion of the overlapping period for the prior
claim that is included in the common period identified at
Step 2 in relation to that claim, and

(b) apply that proportion to the amount of group relief for
25carried-forward losses given on the prior claim.

The previously used amount of group relief for carried-forward
losses in relation to the prior claim is the amount given as a result of
paragraph (b).

(7) For the meaning of the “overlapping period” see section 188DG.

188DD 30 Claimant company’s relevant profits for overlapping period

(1) The claimant company’s relevant profits for the overlapping period
are determined as follows—

Step 1

Calculate—

(a) 35the claimant company’s relevant profits for the claim period
in accordance with section 269ZD(5), and

(b) the claimant company’s relevant maximum for the claim
period in accordance with section 269ZD(4).

Step 2

40Take whichever is the lesser of the amounts calculated at step 1 and
deduct from that amount the sum of—

(a) any deductions made by the company for the claim period

(i) under section 45(4)(b) or 45B(4), or

(ii) under section 303B or 303D by virtue of section 304(5),

(b) 45any deductions made by the company for the claim period
under section 457(3) of CTA 2009,

(c) any deductions made by the company for the claim period
under section 124(5), 124A(5) or 124C(6) of FA 2012, and

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(d) any deductions made by the company for the claim period
which are deductions within any of paragraphs (a) to (k) of
section 269ZD(3).

Step 3

5Take the proportion of the claim period included in the overlapping
period and apply that proportion to the amount arrived at under
step 2.

(2) If section 269ZD has effect in relation to the claimant company for the
claim period with the modifications set out in section 269ZE(1)
10(special loss cap for insurance companies in certain cases), subsection
(1) has effect as if steps 1 and 2 were modified as follows—

Step 1

Determine, in accordance with section 269ZE(5), the modified loss
cap for the claimant company and the claim period.

15Step 2

Reduce that amount by the total of any deductions made by the
claimant company for the claim period which are deductions within
any of paragraphs (a) to (k) of section 269ZD(3).

188DE Previously claimed group relief for carried-forward losses

(1) 20To determine the amount of previously claimed group relief for
carried-forward losses for the overlapping period—

(a) identify any prior claims for the purposes of this section (see
subsection (2)), and

(b) take the steps set out in subsection (3) in relation to each such
25claim.

The amount of previously claimed group relief for carried-forward
losses for the overlapping period is the total of the previously
claimed amounts given at Step 3 in subsection (3) for all the prior
claims.

(2) 30A claim is a prior claim for the purposes of this section if—

(a) it is a claim under section 188CB or 188CC by the claimant
company for group relief for carried-forward losses which
would be given by way of a deduction from the company’s
total profits of the claim period,

(b) 35it is made before the current claim, and

(c) it has not been withdrawn.

(3) These are the steps referred to in subsection (1)(b) to be taken in
relation to each prior claim.

Step 1

40Identify the overlapping period for the prior claim.

Step 2

Identify any period that is common to the overlapping period for the
current claim and the overlapping period for the prior claim.

If there is a common period, go to Step 3.

45If there is no common period, there is no previously claimed amount
in relation to the prior claim (and ignore Step 3).

Step 3