CTM18510 - Shadow ACT: accounting periods to which the Regulations apply: group members: later opt out

SI1999/358, Reg. 5 (9), (10), & (11)

There is provision for a parent company to notify an officer of the Board that the group will not seek further recovery of any unrelieved surplus ACT. That allows groups to relieve themselves of the burden of applying the regulations where the amount for which relief might be obtained is, in their view, insufficient to justify the effort or they see little or no prospect of accessing it in the foreseeable future.

Such a notification is binding on each company that was a member of the group when the notification was made or that became a member of the group subsequently but prior to the end of the parent company's final accounting period.

The final accounting period is the accounting period in which the notification is made except where:

• there is an amount of surplus shadow ACT in respect of an accounting period of a group member beginning in the twelve months (the relevant period) immediately following the end of the accounting period of the parent in which the notification was made, and
• all or part of which falls to be carried back to an accounting period ending before the relevant period,

in which case, it is the latest accounting period in the relevant period from which surplus shadow ACT is carried back to an accounting period ending before the relevant period.

Where:

• the notification is made in an accounting period of a company that is not coterminous with that of the parent company, and
• the accounting period of the parent company in which notification was made is the parent company's final accounting period,

the other company is treated as having two accounting periods, the first of which ended on the last day of the parent company's final accounting period and that notional accounting period is treated as its final accounting period.

A company with unrelieved surplus ACT, which has not reached its final accounting period, could become grouped with a company or companies covered by an immediate opt out under Regulation 5 (3). When that occurs, that company or those companies are treated as if no notification had been made but they are not allowed to access the unrelieved surplus ACT they agreed to forgo.

There is a similar provision to deal with cases where the 'final accounting period' has been determined under Regulation 5 (1), (5), (7) or (8).

A company can be the member of more than one group. For example, if Company A held 51% of the shares in Company B which held 51% of the shares in Company C, Company B would be a member of the Company A group but also the parent company and therefore a member of the group consisting of itself and Company C. When a company is a member of more than one group and its final accounting period for at least one has been determined as a result of a notification under Regulation 5 (5), it is treated in relation to any other group of which it is a member as if its unrelieved surplus ACT had already been relieved in full.