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 4 — Claims for group relief
81

(4)
If the surrenderable amounts exceed the group’s potential relief, the group
relief to be given on the current claim is limited to the amount of the excess.
(5)
The group’s potential relief is the maximum amount of group relief that could
be given if every claim that could be made based on the group condition in
respect of the surrenderable amounts was in fact made (and for this purpose it
5
is to be assumed that the maximum possible claim is made in each case).
(6)
Before determining the maximum amount of potential group relief under
subsection (5), take account of any claim made before the current claim that—
(a)
is a claim for group relief based on the group condition, and
(b)
is in relation to losses or other amounts surrendered by a member of the
10
same group of companies as the surrendering company (other than the
surrendering company itself).
149
Conditions 1 and 3: claimant company in group of companies
(1)
This section applies if—
(a)
the claimant company makes a claim for group relief based on
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consortium condition 1,
(b)
it is the claimant company that is owned by the consortium, and
(c)
the claimant company is also a member of a group of companies.
(2)
This section also applies if—
(a)
the claimant company makes a claim for group relief based on
20
consortium condition 3, and
(b)
the claimant company is a member of a group of companies.
(3)
No group relief is to be given on the claim (“the current claim”) unless the
claimant company’s total profits of the claim period exceed the group’s
potential relief.
25
(4)
If those total profits exceed the group’s potential relief, the group relief to be
given on the current claim is limited to the amount of the excess.
(5)
The group’s potential relief is the maximum amount of group relief that could
be claimed by the claimant company for the claim period on claims based on
the group condition.
30
(6)
Before determining the maximum amount of potential group relief under
subsection (5), take account of any claim made before the current claim that—
(a)
is a claim for group relief based on the group condition made by
another member of the same group of companies as the claimant
company, and
35
(b)
is in relation to losses or other amounts surrendered by a company that
is also a member of that group.

Corporation Tax Bill
Part 5 — Group relief
Chapter 5 — Subsidiaries, groups and consortiums
82

Chapter 5
Subsidiaries, groups and consortiums
Introduction
150
Overview of Chapter
(1)
This Chapter explains how to determine if a company—
5
(a)
is a 75% or 90% subsidiary of another company (see section 151),
(b)
is a member of a group of companies (see section 152),
(c)
is owned by a consortium (see section 153), or
(d)
is a member of a consortium (see section 153).
(2)
Sections 154 to 156 qualify those explanations in cases involving transfers of
10
companies.
Explanations of terms
151
Meaning of “75% subsidiary” and “90% subsidiary”
(1)
In this Part “75% subsidiary” and “90% subsidiary” are to be read in accordance
with Chapter 3 of Part 24, but subject to subsections (2) to (4).
15
(2)
In applying the definition of “75% subsidiary” in section 1154(3), share capital
of a registered industrial or provident society is to be treated as if it were
ordinary share capital.
(3)
If—
(a)
a company (“the shareholder”) directly owns shares in another
20
company, and
(b)
a profit on the sale of those shares would be a trading receipt of the
shareholder,

the shareholder is treated as not being the owner of those shares for the
purpose of determining if any company is a 75% subsidiary of any other
25
company.
(4)
If a company (“the subsidiary”) would, apart from this subsection, be treated
as a 75% or 90% subsidiary of another company (“the parent”) at any time, the
subsidiary is not to be so treated unless at that time the parent—
(a)
is beneficially entitled to at least 75% or 90% (as the case may be) of any
30
profits available for distribution to equity holders of the subsidiary (see
Chapter 6), and
(b)
would be beneficially entitled to at least 75% or 90% (as the case may
be) of any assets of the subsidiary available for distribution to such
equity holders on a winding up (see Chapter 6).
35
152
Groups of companies
For the purposes of this Part two companies are members of the same group of
companies if—
(a)
one is the 75% subsidiary of the other, or
(b)
both are 75% subsidiaries of a third company.
40

Corporation Tax Bill
Part 5 — Group relief
Chapter 5 — Subsidiaries, groups and consortiums
83

153
Companies owned by consortiums and members of consortiums
(1)
For the purposes of this Part a company is owned by a consortium if—
(a)
the company is not a 75% subsidiary of any company, and
(b)
at least 75% of the company’s ordinary share capital is beneficially
owned by other companies each of which beneficially owns at least 5%
5
of that capital.
(2)
The other companies each owning at least 5% of the share capital are the
members of the consortium for the purposes of this Part.
(3)
If—
(a)
a trading company is a 90% subsidiary of a holding company and is not
10
a 75% subsidiary of any company apart from the holding company, and
(b)
as a result of subsection (1), the holding company is owned by a
consortium,

then for the purposes of this Part the trading company is also owned by the
consortium.
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Arrangements for transfers of companies
154
Arrangements for transfer of member of group of companies etc
(1)
This section applies if, apart from this section, one company (“the first
company”) and another company (“the second company”) would be members
of the same group of companies.
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(2)
For the purposes of this Part the companies are not members of the same group
of companies if—
(a)
one of the companies has surrenderable amounts for an accounting
period (“the current period”), and
(b)
arrangements within subsection (3) are in place.
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(3)
Arrangements are within this subsection if they have any of the following
effects.
Effect 1

At some time during or after the current period, the first company or any
successor of it—
30
(a)
could cease to be a member of the same group of companies as the
second company, and
(b)
could become a member of the same group of companies as a third
company (see subsection (4)).
Effect 2
35

At some time during or after the current period a person (other than the first or
second company) has or could obtain, or persons together (other than those
companies) have or could obtain, control of the first company but not of the
second company.
Effect 3
40

At some time during or after the current period, a third company could start to
carry on the whole or a part of a trade that at a time during the current period
is carried on by the first company and could do so—

Corporation Tax Bill
Part 5 — Group relief
Chapter 5 — Subsidiaries, groups and consortiums
84

(a)
as the successor of the first company, or
(b)
as the successor of another company which is not a third company and
which started to carry on the whole or a part of the trade during or after
the current period.
(4)
A “third company” means a company that is not, apart from any arrangements
5
within subsection (3), a member of the same group of companies as the first
company.
155
Arrangements for transfer of company owned by consortium etc
(1)
This section applies if, apart from this section, a trading company would be
owned by a consortium.
10
(2)
The trading company is not owned by the consortium if—
(a)
for an accounting period (“the current period”) the trading company or
a member of the consortium has surrenderable amounts, and
(b)
arrangements within subsection (3) are in place.
(3)
Arrangements are within this subsection if they have any of the following
15
effects.
Effect 1

The trading company or a successor of it could, at some time during or after the
current period, become a 75% subsidiary of a third company (see subsection
(4)).
20
Effect 2

Any person who owns, or any persons who together own, less than 50% of the
ordinary share capital of the trading company—
(a)
has, or together have, control of the trading company, or
(b)
could obtain such control at some time during or after the current
25
period.
Effect 3

Any person (“P”), either alone or together with persons connected with P—
(a)
holds or could obtain at least 75% of the qualifying votes, or
(b)
controls or could control the exercise of at least 75% of those votes.
30

For this purpose—
“connected” is to be read in accordance with section 1122 but as if
subsection (4) of that section were omitted, and
“qualifying votes” means the votes which may be cast in a poll taken at a
general meeting of the trading company held during or after the
35
current period.
Effect 4

A third company could start to carry on the whole or a part of a trade that at a
time during the current period is carried on by the trading company and could
do so—
40
(a)
as the successor of the trading company, or
(b)
as the successor of another company which is not a third company and
which started to carry on the whole or a part of the trade during or after
the current period.

Corporation Tax Bill
Part 5 — Group relief
Chapter 6 — Equity holders and profits or assets available for distribution
85

(4)
A “third company” means a company that is not, apart from any arrangements
within subsection (3), a member of the same group of companies as the trading
company.
(5)
If the trading company would, apart from this section, be owned by a
consortium as a result of section 153(3) (consortiums involving holding
5
companies)—
(a)
references in this section (apart from references under Effect 4) to the
trading company are to be read as including references to the holding
company concerned, and
(b)
Effect 3 does not apply if P is that holding company.
10
156
Sections 154 and 155: supplementary
(1)
This section applies for the purposes of sections 154 and 155.
(2)
“Arrangements”—
(a)
means arrangements of any kind (whether or not in writing), but
(b)
does not include a power of a Minister of the Crown, the Scottish
15
Ministers or a Northern Ireland department to give directions to a
statutory body as to the disposal of assets belonging to the body or to a
subsidiary of the body.
(3)
A company is the successor of another company if it carries on a trade which,
in whole or in part, the other company used to carry on and the circumstances
20
are such that—
(a)
Chapter 1 of Part 22 (transfers of trade without a change of ownership)
applies in relation to the companies as, respectively, the successor and
the predecessor within the meaning of that Chapter, or
(b)
the two companies are connected with each other in accordance with
25
section 1122.
Chapter 6
Equity holders and profits or assets available for distribution
Introduction
157
Introduction to Chapter
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(1)
This Chapter applies for the purposes of sections 143(3)(b) and (c), 144(3)(b)
and (c) and 151(4)(a) and (b).
(2)
For the purposes of this Chapter—
(a)
“new consideration” has the meaning given by section 1115, and
(b)
all loans are regarded as being securities.
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Equity holders
158
Meaning of “equity holder”
(1)
An equity holder of a company (“the relevant company”) is any person who—
(a)
holds ordinary shares in the company (see section 160), or

Corporation Tax Bill
Part 5 — Group relief
Chapter 6 — Equity holders and profits or assets available for distribution
86

(b)
is a loan creditor of the company in relation to a loan other than a
normal commercial loan (see section 162).
(2)
For the purposes of subsection (1)(b) a person is a loan creditor of a company
if the person is a creditor in respect of any redeemable loan capital issued by
the company or in respect of a debt incurred by the company—
5
(a)
for any money borrowed or capital assets acquired by the company,
(b)
for any right to receive income created in favour of the company, or
(c)
for consideration the value of which to the company was, at the time
when the debt was incurred, substantially less than the amount of the
debt (including any premium on the debt).
10
(3)
Subsection (1) is subject to section 159.
159
Use of relevant company’s assets
(1)
Subsection (2) applies if—
(a)
a person (“P”) has, directly or indirectly, provided new consideration
for any shares or securities in the relevant company,
15
(b)
assets of the relevant company are used by P for the purposes of a trade
carried on by P or are used by a person connected with P for the
purposes of a trade carried on by that connected person, and
(c)
in respect of those assets an allowance within subsection (3) has been
made to the relevant company.
20
(2)
P (and no other person) is to be treated as being an equity holder in relation to
the shares or securities mentioned in subsection (1)(a).
(3)
The allowances within this subsection are—
(a)
an annual investment allowance, within the meaning of Chapter 5 of
Part 2 of CAA 2001, in relation to expenditure incurred by the relevant
25
company on the provision of plant or machinery,
(b)
a first-year allowance, within the meaning of that Chapter, in relation
to expenditure so incurred,
(c)
a writing-down allowance, within the meaning of that Chapter, in
relation to expenditure so incurred, and
30
(d)
an allowance under Chapter 3 of Part 6 of CAA 2001 in relation to
expenditure incurred by the relevant company on research and
development (within the meaning of that Part).
(4)
If—
(a)
P is a bank,
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(b)
the only new consideration provided by P is provided in the normal
course of banking business by way of a normal commercial loan (see
section 162), and
(c)
the cost to the relevant company of the assets mentioned in subsection
(1)(b) is less than the amount of the new consideration,
40

the reference in subsection (2) to the shares or securities is to be read as a
reference to only so much of that normal commercial loan as is equal to that
cost of those assets.