In this example ICTA88/S410 (arrangement for transfer of company
to another group or consortium) and ICTA88/S413 (7) (10)
(entitlement to profits and assets tests) do not apply.
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%) throughout the year to 31 December 2002.
CT1, CT2 and CT3 are trading companies, and are 100%
subsidiaries of CH.
All companies make up accounts for twelve months to 31
December 2002.
CH has excess management expenses in the accounting period of
£26,000, and CT2 has profits of £30,000. CT3 has neither
profit nor loss.
CT1 sustained a trading loss of £80,000.
CT3 has neither profit nor loss.
L has profits in excess of £100,000.
Procedure
The amounts that can be surrendered as consortium relief must
be restricted by the amount of any potential group claims by
companies grouped with the group/consortium companies (
CTM80580).
The claims
If no group claims are made, CH is unable to surrender
consortium relief to L. This is because CH can surrender consortium
relief only to the extent that CH’s fellow group companies
cannot claim the relief. Relief cannot be claimed by CT1 because it
has a loss. But CT2 could claim relief for CH's excess management
expenses of £26,000 against its profits of £30,000. This
means there is no part of CHs excess management expenses of
£26,000 that could not be claimed by a fellow group company
and so no part of those excess management expenses can be
surrendered as consortium relief.
CT1 can surrender a maximum of £50,000 by way of
consortium relief. The only company in CT1's group that could claim
relief is CT2, which could claim relief of £30,000. This means
CT1 can surrender as consortium relief the excess of its losses of
£80,000 over CT2’s profits of £30,000, which is
£50,000. L’s share is 60% of this, £30,000.
However if CT2 makes a group claim for relief of £30,000
from CT1, CT1's balance of £50,000 is still available for
consortium relief. Moreover CH’s excess management expenses
of £26,000 could then also be surrendered as consortium
relief. This is because any actual group claims made are taken into
account when determining the potential amount of group claims for
the purposes of ICTA88/S405 (CTM80580). So L could then claim a
maximum of £15,600 (60% x £26,000) from CH as well as the
£30,000 from CT1.
