Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 5 — Group relief
Chapter 1 — Introduction
55

Type 5

Allowable losses of the company available under section 8 of TCGA 1992 so far
as not allowed for the accounting period or any previous accounting period.
(2)
For the purposes of section 92(2) an amount is excluded from a company’s
carry-forward losses if, before the day of the write-off, a claim is made in
5
relation to the amount under section 37 or Part 5 (group relief) of this Act or
section 260(3) of CAA 2001.
(3)
But, for the purposes of section 92(3), any such claim made on or after that day
is to be disregarded in determining the company’s carry-forward losses as at
the end of any accounting period.
10
(4)
The set off of an amount against a company’s carry-forward losses as at the end
of any accounting period is to be done—

first, against those within Types 1 to 4, and

second, against those within Type 5.
96
Interaction with other tax provisions
15
(1)
A company, in calculating its profits of a trade for corporation tax purposes, is
not prevented from deducting a sum by reason only that an amount of
government investment in the company is written off.
(2)
Subsection (3) applies for the purposes of section 50 of TCGA 1992 and section
532 of CAA 2001 in their application in relation to a company.
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(3)
Expenditure is not met by a public body (as defined in section 532(2) of CAA
2001) by reason only that an amount of government investment in the
company is written off.
(4)
Section 464(1) of CTA 2009 does not prevent section 92 of this Act from
applying if the writing-off of an amount of government investment in a
25
company involves the extinguishment (in whole or in part) of a liability under
a loan relationship.
Part 5
Group relief
Chapter 1
30
Introduction
97
Introduction to Part
(1)
This Part—
(a)
allows a company to surrender losses and other amounts, and
(b)
enables, in certain cases involving groups or consortiums of companies,
35
other companies to claim corporation tax relief for the losses and other
amounts that are surrendered.
(2)
The corporation tax relief mentioned in subsection (1) is called “group relief”.
(3)
Chapter 2 allows a company within the charge to corporation tax to surrender
losses and other amounts it has for an accounting period.
40

Corporation Tax Bill
Part 5 — Group relief
Chapter 2 — Surrender of company’s losses etc for an accounting period
56

(4)
Chapter 3 allows a non-UK resident company that is resident or carrying on a
trade in the European Economic Area to surrender losses and other amounts it
has for a period.
(5)
Chapter 4 sets out how a company may claim group relief in respect of losses
and other amounts surrendered, how group relief is given and limitations on
5
the amount of group relief to be given on a claim.
(6)
Chapter 5 explains certain key concepts for the purposes of group relief,
including (in particular) how to determine if a company is a member of a group
of companies or is a member of, or is owned by, a consortium.
(7)
Chapter 6 contains provision about persons holding equity in companies and
10
about distributions of companies’ profits and assets (which is relevant for the
purposes of sections 143(3)(b) and (c) and 144(3)(b) and (c) (in Chapter 4) and
section 151(4)(a) and (b) (in Chapter 5)).
(8)
Chapter 7 contains definitions that apply for the purposes of this Part and
miscellaneous provisions.
15
(9)
For provision about making claims for group relief, see Part 8 of Schedule 18 to
FA 1998 (which includes provision in paragraph 76 of that Schedule for the
making of assessments or other adjustments if group relief has been given
which is, or has become, excessive).
Chapter 2
20
Surrender of company’s losses etc for an accounting period
Introduction
98
Overview of Chapter
(1)
This Chapter allows a company to surrender losses and other amounts it has
for an accounting period.
25
(2)
Sections 99 to 104 set out the basic provisions about the surrendering of losses
and other amounts.
(3)
Sections 105 to 110 place restrictions on the surrendering of losses and other
amounts.
Basic provisions about surrendering losses and other amounts
30
99
Surrendering of losses and other amounts
(1)
This section applies if a company has one or more of the following for an
accounting period—
(a)
a trading loss (see section 100),
(b)
a capital allowance excess (see section 101),
35
(c)
a deficit within Chapter 16 of Part 5 of CTA 2009 (non-trading deficit on
loan relationship),
(d)
amounts allowable as qualifying charitable donations (see Part 6),
(e)
a UK property business loss (see section 102),
(f)
management expenses (see section 103), and
40

Corporation Tax Bill
Part 5 — Group relief
Chapter 2 — Surrender of company’s losses etc for an accounting period
57

(g)
a non-trading loss on intangible fixed assets (see section 104).
(2)
The company may surrender the losses and other amounts under this Chapter
so far as the losses and other amounts are eligible for corporation tax relief
(apart from this Part).
(3)
Subsection (2) applies in relation to losses and other amounts within subsection
5
(1)(a) to (c) even if the company has other profits in the accounting period
mentioned in subsection (1) from which the losses and other amounts could be
deducted.
(4)
But so far as losses and other amounts are within subsection (1)(d) to (g),
subsection (2) is subject to the restriction in section 105.
10
(5)
Subsection (2) is also subject to—
(a)
sections 106 to 110 (which place further restrictions on what the
surrendering company may surrender),
(b)
sections 432 and 433 (which restrict relief for expenses treated as
incurred under Chapter 3 or 4 of Part 9), and
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(c)
sections 887 and 888 (which restrict relief in certain cases involving
partnership losses in a business of leasing plant or machinery).
(6)
Under paragraph 70(1) of Schedule 18 to FA 1998, the company surrenders
losses or other amounts, so far as eligible for surrender under this Chapter, by
consenting to one or more claims for group relief in relation to the amounts (see
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Requirement 1 in section 130).
(7)
In this Part, in relation to losses or other amounts within subsection (1) that a
company has for an accounting period—
“the surrenderable amounts” means the losses or other amounts so far as
eligible for surrender under this Chapter,
25
“surrendering company” means the company that has the losses or other
amounts, and
“the surrender period” means the accounting period for which the
company has the losses or other amounts.
100
Meaning of “trading loss”
30
(1)
In section 99(1)(a) “trading loss” means a loss made in a trade in the surrender
period.
(2)
But it does not include—
(a)
a loss made in a trade carried on wholly outside the United Kingdom,
or
35
(b)
a loss that is not eligible for relief under section 37 as a result of section
44 or 48.
101
Meaning of “capital allowance excess”
(1)
In section 99(1)(b) “capital allowance excess” means an excess of the kind
mentioned in section 260(1) of CAA 2001 for the surrender period.
40
(2)
In determining if there is such an excess for the surrender period and, if there
is, its amount, apply section 260(1) of CAA 2001 but subject to subsections (3)
and (4).

Corporation Tax Bill
Part 5 — Group relief
Chapter 2 — Surrender of company’s losses etc for an accounting period
58

(3)
Capital allowances brought forward from previous accounting periods are to
be ignored.
(4)
The reference in section 260(1) of CAA 2001 to a description of the company’s
income is to be read as a reference to that description of income before
deductions for—
5
(a)
losses of any accounting period other than the surrender period, or
(b)
capital allowances.
102
Meaning of “UK property business loss”
(1)
In section 99(1)(e) “UK property business loss” means a loss made in a UK
property business in the surrender period.
10
(2)
But it does not include a loss treated as made in the surrender period as a result
of section 62(5).
103
Meaning of “management expenses”
(1)
In section 99(1)(f) “management expenses” means expenses that are deductible
for the surrender period under section 1219 of CTA 2009.
15
(2)
But it does not include—
(a)
expenses that are deductible for the surrender period as a result of
section 1223 of CTA 2009, or
(b)
amounts treated as expenses deductible for the surrender period as a
result of section 63 above.
20
104
Meaning of “non-trading loss on intangible fixed assets”
(1)
In section 99(1)(g) “non-trading loss on intangible fixed assets” is to be read in
accordance with Part 8 of CTA 2009.
(2)
But so much of such a loss as is made up of an amount carried forward under
section 753(3) of CTA 2009 is excluded from the scope of section 99(1)(g).
25
Restrictions on losses and other amounts that may be surrendered
105
Restriction on surrender of losses etc within section 99(1)(d) to (g)
(1)
This section applies if the surrendering company has for the surrender period
losses or other amounts within section 99(1)(d) to (g) (“relevant amounts”) that
are eligible for corporation tax relief (apart from this Part).
30
(2)
The surrendering company may not surrender any relevant amount under this
Chapter unless the total of the relevant amounts exceeds the surrendering
company’s total profits of the surrender period.
(3)
If the total of the relevant amounts does exceed those total profits—
(a)
the surrendering company may surrender relevant amounts, but
35
(b)
the total amount that may be surrendered is limited to the amount of
the excess.
(4)
If the surrendering company surrenders relevant amounts, the amount
surrendered is treated as consisting of—

Corporation Tax Bill
Part 5 — Group relief
Chapter 2 — Surrender of company’s losses etc for an accounting period
59

(a)
first, donations within section 99(1)(d),
(b)
second, loss within section 99(1)(e),
(c)
third, expenses within section 99(1)(f), and
(d)
fourth, loss within section 99(1)(g).
(5)
This section is subject to section 305 (oil activities: availability of group relief
5
against ring fence profits).
106
Restriction on losses etc surrenderable by UK resident
(1)
This section applies if the surrendering company is UK resident.
(2)
The surrendering company may not surrender a loss or other amount under
this Chapter so far as the loss or other amount—
10
(a)
is attributable to a permanent establishment through which the
company carries on a trade outside the United Kingdom (see
subsection (3)), and
(b)
is, or represents, an amount within subsection (5).
(3)
A loss or other amount is attributable to a permanent establishment of the
15
surrendering company if (ignoring this section) the amount could be included
in the company’s surrenderable amounts for the surrender period if those
amounts were determined—
(a)
by reference to that establishment alone, and
(b)
by applying, in relation to that establishment, principles corresponding
20
in all material respects to those mentioned in subsection (4).
(4)
The principles are those that would be applied for corporation tax purposes in
determining an equivalent loss or other amount in the case of a permanent
establishment through which a non-UK resident company carries on a trade in
the United Kingdom.
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(5)
An amount is within this subsection if, for the purposes of non-UK tax (see
section 187) chargeable under the law of the territory in which the permanent
establishment is situated, the amount is (in any period) deductible from or
otherwise allowable against non-UK profits (see section 108) of a person other
than the surrendering company.
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(6)
Subsection (7) applies for the purposes of subsection (5) if, in order to
determine if an amount is 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 deductible or
otherwise allowable for tax purposes in the United Kingdom.
35
(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 territory
concerned if (and only if) the surrendering company is treated as resident in
that territory for the purposes of the non-UK tax.
107
Restriction on losses etc surrenderable by non-UK resident
40
(1)
This section applies if the surrendering company is a non-UK resident
company carrying on a trade in the United Kingdom through a permanent
establishment.

Corporation Tax Bill
Part 5 — Group relief
Chapter 2 — Surrender of company’s losses etc for an accounting period
60

(2)
The surrendering company may surrender a loss or other amount under this
Chapter only so far as conditions A, B and C are met in relation to the loss or
other amount.
(3)
Condition 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
5
corporation tax for the surrender period.
(4)
Condition B is that the loss or other amount is not attributable to activities of
the surrendering company that are double taxation exempt for the surrender
period (see section 186).
(5)
Condition C is that—
10
(a)
the loss or other amount does not correspond to, and is not represented
in, an amount within subsection (6), and
(b)
no amount brought into account in calculating the loss or other amount
corresponds to, or is represented in, an amount within subsection (6).
(6)
An amount is within this subsection if, for the purposes of non-UK tax
15
chargeable under the law of a territory, the amount is (in any period)
deductible from or otherwise allowable against non-UK profits of any person.
(7)
But an amount is not to be taken to be within subsection (6) by reason only that
it is—
(a)
an amount of profits brought into account for the purpose of being
20
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).
(8)
Subsection (9) applies for the purposes of subsection (6) if, in order to
determine if an amount is deductible or otherwise allowable for the purposes
25
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 deductible or
otherwise allowable for tax purposes in the United Kingdom.
(9)
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
30
concerned.
108
Meaning of “non-UK profits”
(1)
In sections 106 and 107 “non-UK profits”, in relation to a person, means—
(a)
amounts within subsection (2), or
(b)
amounts taken into account in calculating amounts within subsection
35
(2).
(2)
Amounts are within this subsection if they—
(a)
are taken for the purposes of the non-UK tax in question to be the
amount of the profits, income or gains on which (after allowing for
deductions) the person is charged with that tax, and
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(b)
are not amounts corresponding to, and are not represented in, the total
profits of any person of any accounting period.
(3)
For the purposes of subsection (2)(b) amounts that arise from activities of a
non-UK resident company that are double taxation exempt for an accounting
period (see section 186) are excluded from the company’s total profits of that
45
period.