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.
The facts
O is a trading company owned by members of a consortium B
(50%) and Y (50%).
O owns 75% of the ordinary shares in company P.
All companies make up their accounts for the year to 31
December 2002. In that period:
O has profits of £10,000.
P has trading losses of £5,000.
Y has substantial losses.
B has profits.
Procedure
Were it not for for ICTA88/S405 (4) (
CTM80585), O could make a consortium
claim for Y's losses up to a maximum of Y's share (‘relevant
fraction’
CTM80545) of O's profits (50% x
£10,000 = £5,000). O could also claim group relief in
respect of P's loss. So effectively O would obtain relief to the
extent of the whole of its profits, rather than an amount
restricted in accordance with Y's share of O's profits.
Under the rules in ICTA88/S405 (4), O's profits are
restricted by the losses it could claim by way of group relief in
respect of P's losses, in order to arrive at the maximum consortium
relief that O can claim in respect of Y's losses.
The maximum consortium relief is therefore 50% x
(£10,000 - £5,000) = £2,500.
