CTM80450 - Groups: group relief: example: surrender of excess charges
In the year ended 31 December 2002 Company R is a 75% subsidiary of Company G, 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 G | £1,000 | |
| Chargeable gains | £800 | |
| Less capital losses brought forward | £800 | Nil |
| Profits & gains from non-trading loan relationships | £3,000 | |
| Charges paid (paid wholly for business purposes) | £4,000 | |
| Company R | ||
| Trading profits | £1,000 | |
| Profits & gains from non-trading loan relationships | £500 | |
| Charges paid | £200 |
Company R claims group relief from Company G, with the consent of Company G. Group relief is limited to the smaller of:
- Company G's excess of charges over the total profits for the accounting period ( CTM80142), and
- Company R's total profits as reduced by other reliefs under ICTA88/S407 (1)(b) ( CTM80400).
Company G’s excess of charges over the gross profits for the accounting period is £1,200. Under ICTA88/S403ZE the total profits are calculated without taking into account losses of any other period. So, for this purpose, the chargeable gains of £800 are not reduced by the £800 capital losses brought forward.
Calculation of Company G’s excess charges.
| Charges | £4,000 | |
| Chargeable gains | £800 | |
| Profits & gains from non-trading loan relationships | £3,000 | |
| Management expenses | £1,000 | £2,800 |
| Excess charges | £1,200 |
Company R'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 | |
| Less charges paid | £200 | £300 |
| 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.
The CT computations for the accounting period to 31 December 2002 are as follows.
| Company R | ||
| 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 | |
| Company G | ||
| Chargeable gains | £800 | |
| Less capital losses brought forward | £800 | Nil |
| Profits & gains from non-trading loan relationships | £3,000 | |
| Less management expenses | £1,000 | |
| Less charges | £2,000 | £3,000 |
| CT profits | Nil | |
| Company G's carry forward position at 31 December 2002 | ||
| Charges of accounting period | £4,000 | |
| Less allowed in computation | £2,000 | |
| Surrendered as group relief | £1,200 | £3,200 |
| Excess charges to carry forward under ICTA88/S75 (3) | £800 |
