CTM80150 - Groups: group relief: companies affected
ICTA88/S402 (2) (2A), (3A) and (3B), ICTA88/S413 (5)
Up to 1 April 2006 both the claimant and surrendering companies must be both:
- within the charge to CT, that is they must:
- be resident in the UK, or
- if not resident in the UK, carry on a trade in the UK through a permanent establishment (see CTM80305 onwards for guidance on group relief claims and surrenders by UK permanent establishments ),
and
- members of the same group.
Prior to 1 April 2000, the rule in the first bullet was that the
companies had to be resident in the UK. For transitional provisions
where an accounting period straddles 1 April 2000 see
CTM80370.
As from 1 April 2006, if certain restrictive conditions are
satisfied, it is possible for a 75% subsidiary resident in a
European Economic Area territory to surrender its losses as group
relief, (
CTM81500 onwards).
For companies to be members of the same group:
- one company must be a 75% subsidiary of the other, or
- both must be 75% subsidiaries of a third company.
Prior to 1 April 2000, the rule was that all the companies
forming a group relationship had to be resident in the UK. For
accounting periods ending on or after 1 April 2000 group
relationships can be formed by reference to companies resident
anywhere in the world.
See press release PR27/99 for group relationships established
by reference to companies resident in other Member States of the
European Union or the European Economic Area.
The definition of ‘75% subsidiary' is in ICTA88/S838
(1).
Registered industrial and provident societies can be
subsidiaries for this purpose, as well as owners of subsidiaries.
In deciding whether a company is a '75%', shareholdings owned
directly or indirectly in companies whose shares are held on
trading account, for example by a dealer cannot be taken into
account.
In addition the following provisions must be satisfied for
group relief purposes:
- ICTA88/S413 (7) - (10) and ICTA88/SCH18,
- ICTA88/S410.
ICTA88/S413 (7) to (10) and ICTA88/SCH18 extend the qualifying
tests to include not only the appropriate percentage of the
ordinary share capital, but in addition the beneficial entitlement
to profits and assets - see
CTM80155 onwards.
Under ICTA88/S410 two companies are not treated as belonging
to the same group if there are arrangements by which, broadly:
- one of the two companies could be switched to another group, or
- the two companies are, or could be, under different control, or
- assets comprised in a trade could be transferred out of the group by one of the two companies without attracting a balancing adjustment.
You will find detailed guidance on ICTA88/S410 at CTM80165 onwards.
