CTM80445 - Groups: group relief: example: surrender of excess management expenses
In the year ended 31 December 2002 Company U is a 75% per cent subsidiary of Company V, which is a group holding company. Both companies make up their accounts to 31 December. The accounts and computations of the companies for the 12 months accounting period to 31 December 2002 show the following.
| Company V | |
| Management expenses disbursed within year (ICTA88/S75 (1)) | £5,000 |
| Management expenses brought forward (ICTA88/S75 (3)) | £500 |
| Schedule A income | £800 |
| Profits & gains from non-trading loan relationships | £3,000 |
| Company U | |
| Trading profits | £1,000 |
| Profits & gains from non-trading loan relationships | £500 |
| Charges paid | £200 |
Company U claims group relief from Company V, with the consent of Company V. Group relief is limited to the smaller of:
- Company V's excess of management expenses over the total profits for the accounting period ( CTM80142), and
- Company U's total profits as reduced by charges paid ( CTM80400).
Company V's excess of management expenses over the total profits
for the accounting period is £1,200. Under ICTA88/S403ZD (4)
for group relief purposes management expenses do not include
amounts carried forward from earlier periods. So, in this case, the
£500 management expenses brought forward from the previous
accounting period are disregarded.
Calculation of Company V’s excess management expenses
for the purposes of group relief.
| Management expenses (disbusrsed within year) | £5,000 | |
| Sch A income | £800 | |
| Profits & gains from non-trading loan relationships | £3,000 | £3,800 |
| Excess management expenses | £1,200 |
Company U's total profit, as reduced by other reliefs, is £1,300, calculated as follows.
| Trading profits | £1,000 |
| Profits & gains from non-trading loan relationships | £500 |
| £1,500 | |
| Less charges paid | £200 |
| Total profits as reduced by other reliefs | £1,300 |
So the group relief is limited to the smaller of £1,200 and £1,300, that is £1,200.
Company V's CT computation for the accounting period to 31 December 2002 is as follows.
| Sch A income | £800 |
| Profits & gains from non-trading loan relationships | £3,000 |
| £3,800 | |
| Less management expenses | £3,800 |
| CT profits | Nil |
Company V's carry forward position as at 31 December 2002 is as follows.
| Management expenses (including amounts brought forward from earlier periods) | £5,500 | |
| Less allowed in computation | £3,800 | |
| Surrendered as group relief | £1,200 | £5,000 |
| Excess management expenses available to carry forward | £500 |
Company U's CT computation for the accounting period to 31 December 2002 is as follows.
| Sch D, Case I income | £1,000 | |
| Profits & gains from non-trading loan relationships | £500 | |
| £1,500 | ||
| Less charges | £200 | |
| Less group relief claimed | £1,200 | £1,400 |
| CT profits | £100 |
