In this example ICTA88/S410 (arrangement for transfer of company
to another group or consortium) and ICTA88/S413 (7) to (10)
(entitlement to profits and assets tests) do not apply.
Apportionments are on a time basis.
The consortium and group structure is as shown in the diagram
at
CTM80590.
Facts
CH is a company owned by members of a consortium L (60%) and
X (40%). L is a 75% subsidiary of P. This part of the consortium
and group structure has existed for many years.
CH draws up its accounts to 31 December. L and P both draw up
their accounts to 30 June.
For its accounting period to 31 December 2000, CH has losses
of £72,000.
For their accounting periods to 30 June 2001, P has profits
of £20,000 and L has profits of £15,000.
S1 becomes a 75% subsidiary of P on 1 October 2000.
S1 Ltd has profits of £6,000 for its accounting period
to 30 June 2001.
Each of P, L and S1 makes a consortium claim in respect of
CH’s losses against its profits for the accounting period to
30 June 2001. They make the claims in the order L first, then P and
then S1 and ask for the claims to be dealt with in that order (
CTM80220).
Procedure
The provisions about apportionment to overlapping periods and
multiple claims (ICTA88/S403A -
CTM80215) interact with those about
consortium shares (ICTA88/S403C -
CTM80545) and those about claims by
group members ICTA88/S406 -
CTM80555.
L’s claim
The overlapping period (
CTM80225)·is 6 months ended
31/12/2000.
CH’s ‘surrenderable amount’ for its
accounting period ended 31/12/2000 is £72,000. Under
ICTA88/S403A (3)(b) that is not reduced by reference to
ICTA88/S403C.
CH’s ‘unused part of the surrenderable amount for
the overlapping period’ (
CTM80235) is the same as its
‘surrenderable amount for the overlapping period’ (
CTM80230). It is:
| 6/12 | x | £72,000 | = | £36,000 |
However ICTA88/S403C (2) ( CTM80540) limits this to L’s relevant fraction (ICTA88/S406 (6) – CTM80560) of CH’s ordinary share capital. (In the rest of this example ‘relevant fraction’ is referred to as ‘share’.) This limit is:
| 60% | x | £36,000 | = | £21,600 |
L’s ‘unrelieved part of the claimant’s total profits for the overlapping period (CTM80230) is also the same as its ‘total profits for the overlapping period’, as it has made no prior claims. It is:
| 6/12 | x | £15,000 | = | £7,500 |
The amount that can be surrendered/claimed is the smaller of
£21,600 and £7,500 = £7,500.
P’s claim
P can claim consortium relief because it is in the same group
as the link company L, ICTA88/S406 applies (
CTM80550).
The overlapping period is 6 months ended 31/12/2000.
The starting point for working out CH’s
‘surrenderable amount for the overlapping period’ is
£36,000 as above. ICTA88/S403C (2) (CTM80540) limits the
surrenderable amount for the overlapping period by reference to
L’s share (ICTA88/S406 (2) -
CTM80555) of CH’s ordinary share
capital. This limit is:
| 60% | x | £36,000 | = | £21,600 |
CH has made a prior surrender to L and so its ‘unused part
of the surrenderable amount for the overlapping period’ must
take account of that. Following the steps in
CTM80240:
STEP 1
L’s claim from CH involves part of CH’s
surrenderable amount for accounting period ended 31/12/2000.
STEP 2
The amount of L’s claim, £7,500, is treated as
being for the overlapping period in that claim, which is 6 months
ended 31/12/2000.
The common period of the overlapping periods in L’s
claim and P’s claim is 6 months ended 31/12/2000.
The whole of the £7,500 is apportioned to that common
period.
STEP 3
The total, £7,500, is the ‘amount of any prior
surrenders attributable to the overlapping period’.
So CH’s ‘unused part of the surrenderable amount
for the overlapping period’ is £21,600 less £7,500
which is £14,100.
P’s ‘unrelieved part of the claimant’s
total profits for the overlapping period’ is the same as its
‘total profits for the overlapping period’, as it has
made no prior claims. It is:
| 6/12 | x | £20,000 | = | £10,000 |
The amount that can be surrendered/claimed is the smaller of
£14,100 and £10,000 = £10,000.
S1’s claim
As with L and P, the 6 month period from 1/1/2001 to
30/6/2001 does not overlap with CH’s accounting period ended
31/12/2000. In addition, for the 3-month period to 1/10/2000 S1 was
not in a group relationship with the link company L. So it was not
a ‘group member’ for that time and ICTA88/S406 (3)
(CTM80555) applies to prevent that 3 months from being part of an
overlapping period. So the overlapping period is the 3 months ended
31/12/2000.
The starting point for working out CH’s
‘surrenderable amount for the overlapping period’
is:
| 3/12 | x | £72,000 | = | £18,000 |
As with P above, ICTA88/403C (2) limits this by reference to L’s share of CH’s ordinary share capital. This limit is:
| 60% | x | £18,000 | = | £10,800 |
CH has made a prior surrender to L and P and so its
‘unused part of the surrenderable amount for the overlapping
period’ must take account of that. Following the steps in
CTM80240:
STEP 1
L’s claim from CH involves part of CH’s
surrenderable amount for accounting period ended 31/12/2000.
P’s claim from CH involves part of CH’s
surrenderable amount for accounting period ended 31/12/2000.
STEP 2
The amount of L’s claim, £7,500, is treated as
being for the overlapping period in that claim, which is 6 months
ended 31/12/2000.
The common period of the overlapping periods in L’s
claim and S1’s claim is 3 months ended 31/12/2000.
The £7,500 is apportioned to that common period:
| 3/6 | x | £7,500 | = | £3,750 |
The amount of P’s claim, £10,000, is treated as being
for the overlapping period in that claim, which is also 6 months
ended 31/12/2000.
The common period of the overlapping periods in P’s
claim and S1’s claim is 3 months ended 31/12/2000.
The £10,000 is apportioned to that common period
| 3/6 | x | £10,000 | = | £5,000 |
STEP 3
The total £8,750 (£3,750 plus £5,000) is the
‘amount of any prior surrenders attributable to the
overlapping period’.
So CH’s ‘unused part of the surrenderable amount
for the overlapping period’ is £10,800 less £8,750
which is £2,050.
S1’s ‘unrelieved part of the claimant’s
total profits for the overlapping period’ is the same as its
‘total profits for the overlapping period’, as it has
made no prior claims. It is:
| 3/12 | x | £6,000 | = | £1,500 |
The amount that can be surrendered/claimed is the smaller of
£2,050 and £1,500 = £1,500.
ICTA88/S406 (4)
The last stage is to determine the maximum amount that can be
allowed to L, P and S1 taken together. The calculation of the
maximum amount is by reference to the amount that L could claim if
it had sufficient profits (
CTM80555). That amount is £21,600
(L’s share of CH’s surrenderable amount). The total
£19,000 claimed by L (£7,500), P (£10,000) and S1
(£1,500) is less than this, so no further restriction is
needed.
Note that if any of CT1, CT2 or CT3 had profits, then
ICTA88/S405 (2) (
CTM80580) would apply to reduce
CH’s losses available for surrender. This is because CH is a
group/consortium company and there is the potential for CT1, CT2
and CT3 to make group claims in respect of its losses. CH’s
losses of £72,000 would be reduced by the total amount of such
claims.
