CTM80400 - Groups: group relief: limit of relief
ICTA88/S407
Section 407 provides that the group relief which a company may be allowed must not exceed the amount of the claimant company's total profits actually arising in the accounting period as reduced by any relief under ICTA88 such as:
- any relief for past losses or other amounts brought forward from previous periods,
- any relief available to the company (whether claimed or not) for a loss in trade in the same accounting period under ICTA88/S393 (2) or ICTA88/S393A,
- any relief for Schedule A losses of the same accounting period under ICTA88/S392A (1),
- charges on income.
The total profits must also be reduced by:
- any relief available to the company (whether claimed or not) for an excess of capital allowances under CAA01/S260 (3)(a) in the same accounting period,
- any relief for non-trading loan relationship deficits of the same accounting period.
However the amount of the claimant company's total profits is not reduced by any relief derived from a subsequent period including:
- relief under ICTA88/S393A for a loss of a later accounting period, or
- relief under CAA01/S260 (3)(b) for an excess of capital allowances of a later period,
- relief under FA96/S83 (2), or in the case of an insurance company FA96/SCH11/PARA4 (3), for a non-trading loan relationship deficits of a later accounting period.
A group relief claim may be further restricted where there is:
- more than one claimant in respect of the same loss or other amount, or
- more than one company surrendering a loss or other amount,
to the same claimant
CTM80210.
Subject to such a restriction, the effective limit of each
claim is:
- the surrendering company's loss or other amount, or
- the claimant company's total profits as reduced by other relief's for the same and earlier accounting periods,
whichever is the smaller - see the example at CTM80445.
Example
Company M is a claimant company for group relief purposes, and wants to claim group relief from its parent company for the year ended 31 July 2001. Company M's accounts for the year ended 31 July 2001 show the following.
| Trading loss | (£50,000) |
| Case III income | £100,000 |
| Chargeable gains | £75,000 |
| Chargeable losses brought forward | (£50,000) |
| Charges paid | (£2,000) |
The company decides not to claim relief for the trading loss under ICTA88/S393A. At this point the profits for 2001 are £123,000, as follows.
| Case I income | Nil | |
| Case III income | £100,000 | |
| Chargeable gains | £75,000 | |
| Losses brought forward | (£50,000) | £25,000 |
| £125,000 | ||
| Charges | (£2,000) | |
| Profit | £123,000 |
However the group relief which Company M claims for the year
ended 31 July 2001 cannot exceed £73,000. This is because its
maximum group relief claim is reduced by the trading loss of
£50,000, even though the company does not claim relief for the
loss under ICTA88/S393A (1)(a).
So Company M cannot claim group relief of £123,000. Its
claim is limited to £73,000.
Company M's accounts for the year ended 31July 2002 show a
trading loss of £35,000, and the company claims under
ICTA88/S393A (1)(b) for this amount to be set off against the
profits for the accounting period ended 31 July 2001. So the
company's profits for the accounting period ended 31 July 2001
become £88,000, as follows:
| Case I income | Nil | |
| Case III income | £100,000 | |
| Chargeable gains | £75,000 | |
| Losses brought forward | (£50,000) | £25,000 |
| Losses carried back from accounts y/e 31 July 2002 | (£35,000) | |
| £90,000 | ||
| Charges | (£2,000) | |
| Profit | £88,000 |
The maximum group relief that Company M can claim for the year ended 31 July 2001 remains at £73,000. This is because its maximum group relief claim is not affected by the carry-back of losses under ICTA88/S393A (1)(b). The maximum group relief claim is still reduced by the trading loss of the year of £50,000, even though the company does not claim relief for the loss under ICTA88/S393A (1)(a). So Company M's claim is still limited to £73,000.
