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 3 — Surrenders made by non-UK resident company resident or trading in the EEA
68

concepts of law in relation to a UK property business or land in the United
Kingdom.
(4)
In this section “the relevant EEA territory” means—
(a)
the EEA territory in which the surrendering company is resident, or
(b)
(as the case may be) the EEA territory in which the surrendering
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company carries on a trade through a permanent establishment.
125
Assumptions as to accounting periods
(1)
Assume that an accounting period of the surrendering company begins at the
beginning of the EEA accounting period.
(2)
Assume that the accounting period ends—
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(a)
when the EEA accounting period ends, or
(b)
if earlier, at the end of 12 months.
(3)
If the accounting period ends before the end of the EEA accounting period,
assume that a further accounting period then begins and so on until the EEA
accounting period ends.
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(4)
Assume that any further accounting period ends—
(a)
at the end of 12 months, or
(b)
if earlier, when the EEA accounting period ends.
126
Assumptions in relation to capital allowances
(1)
This section applies if, before the EEA accounting period, the surrendering
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company incurs capital expenditure on the provision of plant or machinery for
the purposes of any activity.
(2)
For the purposes of Part 2 of CAA 2001 assume that the plant or machinery—
(a)
was provided for purposes wholly other than those of the activity, and
(b)
was not brought into use for the purposes of the activity until the
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beginning of the EEA accounting period,

and section 13 of CAA 2001 is to apply accordingly.
(3)
This section is to be read as if contained in Part 2 of CAA 2001.
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Amounts excluded because of certain arrangements
(1)
An amount (or part of an amount) resulting from Step 4 in section 113 is
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excluded if—
(a)
it is not attributable for corporation tax purposes to any permanent
establishment through which the surrendering company carries on a
trade in the United Kingdom, and
(b)
the following condition is met.
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(2)
The condition is that the amount (or part)—
(a)
would not have resulted from Step 4 but for any arrangements within
subsection (3), or
(b)
would not have arisen to the surrendering company but for any such
arrangements.
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Part 5 — Group relief
Chapter 4 — Claims for group relief
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(3)
Arrangements are within this subsection if their main purpose, or one of their
main purposes, is to secure that the amount (or part) may be surrendered for
the purposes of group relief.
(4)
“Arrangements” includes any agreement, understanding, scheme, transaction
or series of transactions (whether or not legally enforceable).
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128
Rules for recalculating EEA amount
(1)
For the purposes of Step 3 in section 113 the EEA amount is to be recalculated
in accordance with any provision made by or under the Corporation Tax
Acts—
(a)
that applies for the purpose of calculating for corporation tax purposes
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losses or other amounts to which the EEA amount corresponds, or
(b)
that otherwise affects in any way the amount of those losses or other
amounts that is eligible for corporation tax relief.
(2)
For the purposes of subsection (1) the Treasury may by regulations provide for
the modification of any provision made by or under the Corporation Tax
15
Acts—
(a)
that applies as mentioned in subsection (1)(a), or
(b)
that otherwise affects an amount as mentioned in subsection (1)(b).
(3)
Regulations under subsection (2) may make provision in relation to—
(a)
all classes of trade or business, or
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(b)
any particular class or classes of trade or business.
(4)
Regulations under subsection (2) may—
(a)
make different provision for different cases or different purposes,
(b)
contain incidental, supplemental, consequential and transitional
provision and savings, and
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(c)
make provision having retrospective effect.
Chapter 4
Claims for group relief
Introduction
129
Overview of Chapter
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(1)
This Chapter sets out how a company may claim group relief, how group relief
is given and limitations on the amount of group relief to be given on a claim.
(2)
Sections 130 to 134 deal with claims in relation to surrenderable amounts under
Chapter 2.
(3)
Sections 135 and 136 deal with claims in relation to surrenderable amounts
35
under Chapter 3.
(4)
Section 137 deals with how group relief is given.
(5)
Sections 138 to 142 set out a limitation on the amount of group relief to be given
on any claim.

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Part 5 — Group relief
Chapter 4 — Claims for group relief
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(6)
Sections 143 to 149 set out limitations on the amount of group relief to be given
on claims based on consortium condition 1, consortium condition 2 or
consortium condition 3 (see Requirement 3 in section 130).
Surrenderable amounts under Chapter 2
130
Group relief claims on amounts surrenderable under Chapter 2
5
(1)
This section applies in relation to the surrendering company’s surrenderable
amounts for the surrender period under Chapter 2.
(2)
A company (“the claimant company”) may make a claim for group relief for an
accounting period (“the claim period”) in relation to those amounts (in whole
or in part) if the following requirements are met.
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Requirement 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.
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Requirement 3

At a time during the overlapping period—
(a)
the group condition is met (see section 131),
(b)
consortium condition 1 is met (see section 132),
(c)
consortium condition 2 is met (see section 133(1), (3) and (4)), or
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(d)
consortium condition 3 is met (see section 133(2), (3) and (4)).
(3)
More than one company may make a claim for group relief in relation to any
surrenderable amounts (but the giving of group relief in relation to any claim
is subject to the provisions of this Chapter).
131
The group condition
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(1)
The group condition is met if the surrendering company and the claimant
company—
(a)
are members of the same group of companies (see section 152), and
(b)
are both UK related.
(2)
For the meaning of “UK related” in subsection (1)(b) and in sections 132 and
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133, see section 134.
132
Consortium condition 1
(1)
Consortium condition 1 is met if subsection (2) or (3) applies.
(2)
This subsection applies if—
(a)
the surrendering company is a trading company or a holding company,
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(b)
the surrendering company is owned by a consortium,
(c)
the claimant company is a member of the consortium, and
(d)
both companies are UK related.
(3)
This subsection applies if—

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Part 5 — Group relief
Chapter 4 — Claims for group relief
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(a)
the claimant company is a trading company or a holding company,
(b)
the claimant company is owned by a consortium,
(c)
the surrendering company is a member of the consortium, and
(d)
both companies are UK related.
(4)
But consortium condition 1 is not met if a profit on a sale within subsection (5)
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by the company that is the member of the consortium would be a trading
receipt of the member.
(5)
A sale is within this subsection if it is a sale of—
(a)
the share capital the member owns in the company owned by the
consortium, or
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(b)
if that company is owned by the consortium as a result of section 153(3)
(consortiums involving holding companies), the share capital the
member owns in the holding company in question.
133
Consortium conditions 2 and 3
(1)
Consortium condition 2 is met if—
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(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 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”),
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(e)
the link company is a member of the consortium, and
(f)
the surrendering company, the claimant company and the link
company are all UK related.
(2)
Consortium condition 3 is met if—
(a)
the claimant company is a trading company or a holding company,
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(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 companies
as a third company (“the link company”),
(e)
the link company is a member of the consortium, and
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(f)
the surrendering company, the claimant company and the link
company are all UK related.
(3)
But neither consortium condition 2 nor consortium condition 3 is met if a profit
on a sale within subsection (4) by the link company would be a trading receipt
of that company.
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(4)
A sale is within this subsection if it is a sale of—
(a)
the share capital the link company owns in the company (“the
consortium company”) owned by the consortium as mentioned in
subsection (1)(b) or (2)(b), or
(b)
if the consortium company is owned by the consortium as a result of
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section 153(3) (consortiums involving holding companies), the share
capital the link company owns in the holding company in question.
134
Meaning of “UK related” company
For the purposes of sections 131 to 133 a company is UK related if—

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Part 5 — Group relief
Chapter 4 — Claims for group relief
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(a)
it is a UK resident company, or
(b)
it is a non-UK resident company carrying on a trade in the United
Kingdom through a permanent establishment.
Surrenderable amounts under Chapter 3
135
Group relief claims on amounts surrenderable under Chapter 3
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(1)
This section applies in relation to the surrendering company’s surrenderable
amounts for the surrender period under Chapter 3.
(2)
A company (“the claimant company”) may make a claim for group relief for an
accounting period (“the claim period”) in relation to those amounts (in whole
or in part) if the following requirements are met.
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Requirement 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.
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Requirement 3

The EEA group condition is met (see section 136) at a time during the
overlapping period.
(3)
More than one company may make a claim for group relief in relation to any
surrenderable amounts (but the giving of group relief in relation to any claim
20
is subject to the provisions of this Chapter).
136
The EEA group condition
(1)
The EEA group condition is met if subsection (2) or (3) applies.
(2)
This subsection applies if—
(a)
the surrendering company is a 75% subsidiary of the claimant
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company, and
(b)
the claimant company is UK resident.
(3)
This subsection applies if—
(a)
both the surrendering company and the claimant company are 75%
subsidiaries of a third company, and
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(b)
the third company is UK resident.
(4)
Chapter 5 explains how to determine if a company is a 75% subsidiary of
another company.
Giving of group relief
137
Deduction from total profits
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(1)
If the claimant company makes a claim as mentioned in section 130 or 135, the
group relief is given by the making of a deduction from the claimant
company’s total profits of the claim period.

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Part 5 — Group relief
Chapter 4 — Claims for group relief
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(2)
The amount of the deduction is—
(a)
an 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.
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(3)
Subsection (2) is subject to—
(a)
subsections (4) to (7),
(b)
the limitation set out in sections 138 to 142 that applies in relation to all
claims for group relief,
(c)
the limitations set out in sections 143 to 149 that apply in relation to
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claims based on consortium condition 1, consortium condition 2 or
consortium condition 3,
(d)
Chapter 3 of Part 4 (relief in cases involving trading losses made in
limited partnerships or limited liability partnerships), and
(e)
section 305(1) (group relief in cases involving oil activities etc).
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(4)
The deduction is to be made—
(a)
before deductions for relief within subsection (5), but
(b)
after all other deductions to be made at Step 2 in section 4(2) (apart from
deductions for group relief on other claims).
(5)
The deductions within this subsection are deductions for relief—
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(a)
under 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)
under section 389 or 459 of CTA 2009 in relation to a deficit for a deficit
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period after the claim period.
(6)
For the purposes of subsection (4)(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.
(7)
Corporation tax relief is not to be given more than once for the same amount,
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whether—
(a)
by giving group relief and by giving some other relief (for any
accounting period) to the surrendering company, or
(b)
by giving group relief more than once.
General limitation on amount of group relief to be given
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138
Limitation on amount of group relief applying to all claims
The amount of group relief to be given on a claim (“the current claim”) is
limited to—
(a)
the unused part of the surrenderable amounts (see section 139), or
(b)
if less, the unrelieved part of the claimant company’s available total
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profits of the claim period (see section 140).
139
Unused part of the surrenderable amounts
(1)
The unused part of the surrenderable amounts is the amount equal to—

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Part 5 — Group relief
Chapter 4 — Claims for group relief
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(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)
To determine the surrenderable amount for the overlapping period—
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(a)
take the proportion of the surrender period included in the overlapping
period, and
(b)
apply that proportion to the surrenderable amounts for the surrender
period.

The surrenderable amount for the overlapping period is the amount given as a
10
result of paragraph (b).
(3)
To determine the amount of prior surrenders for the overlapping period—
(a)
identify 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.
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The amount of prior surrenders for the overlapping period is the total 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 a claim by any company for group relief in respect of the whole or
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a part of the amounts that, in relation to the current claim, are the
surrendering company’s surrenderable amounts for the surrender
period,
(b)
it is made before the current claim, and
(c)
it has not been withdrawn.
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(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.
Step 2
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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 relation to
the prior claim (and ignore Step 3).
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Step 3

Determine the previously used amount of group relief in relation to the prior
claim (see subsection (6)).
(6)
To determine the previously used amount of group relief in relation to a prior
claim—
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(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 given on the prior
claim.
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