Income and Corporation Taxes Act 1988

403 Losses etc. which may be surrendered by way of group relief. U.K.

(1) M1 Subject to the provisions of this Chapter, if in any accounting period the surrendering company has incurred a loss, computed as for the purposes of section [F1 393A(1)], in carrying on a trade, the amount of the loss may be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(2) Subsection (1) above shall not apply to so much of a loss as is excluded from [F2 subsection (1) of section 393A by subsection (3) of that section] or by section 397.

(3) M2 Subject to the provisions of this Chapter, if for any accounting period any capital allowances fall to be made to the surrendering company which—

(a) are to be given by discharge or repayment of tax, and

(b) are to be available primarily against a specified class of income,

so much of the amount of those allowances (exclusive of any carried forward from an earlier period) as exceeds its income of the relevant class arising in that accounting period (before deduction of any losses of any other period or of any capital allowances) may be set off for purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(4) Subject to the provisions of this Chapter, if for any accounting period the surrendering company (being an investment company) may under subsection (1) of section 75 deduct as expenses of management any amount disbursed for that accounting period, so much of that amount (exclusive of any amount deductible only by virtue of subsection (3) of that section) as exceeds the company’s profits of that accounting period may be set off for purposes of corporation tax against the total profits of the claimant company (whether an investment company or not) for its corresponding accounting period.

(5) The surrendering company’s profits of the period shall be determined for the purposes of subsection (4) above without any deduction under section 75 and without regard to any deduction falling to be made in respect of losses or allowances of any other period.

(6) References in subsections (4) and (5) above to section 75 do not include references to that section as applied by section 76 to companies carrying on life assurance business.

(7) Subject to the provisions of this Chapter and section 494(4), if in any accounting period the surrendering company has paid any amount by way of charges on income, so much of that amount as exceeds its profits of the period may be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(8) The surrendering company’s profits of the period shall be determined for the purposes of subsection (7) above without regard to any deduction falling to be made in respect of losses or allowances of any other period, or to expenses of management deductible only by virtue of section 75(3).

(9) M3 In applying any of the preceding subsections in the case of a consortium claim—

(a) where the claimant company is a member of a consortium, only a fraction of the loss referred to in subsection (1) above, or of the excess referred to in subsection (3), (4) or (7) above, as the case may be, may be set off under the subsection in question;

(b) where the surrendering company is a member of a consortium that loss or excess shall not be set off under the subsection in question against more than a fraction of the total profits of the claimant company;

and that fraction shall be equal to that member’s share in the consortium in the accounting period referred to in section 402(4), subject to any further reduction under section 408(2) and subject also to sections 405(4) and 406(2) and (6).

(10) M4 Where a company owned by a consortium—

(a) has in any relevant accounting period incurred such a loss as is referred to in subsection (1) above, and

(b) has profits (of whatever description) of that accounting period against which that loss could be set off under section [F3 393A(1)],

the amount of that loss which is available to any member of the consortium on a consortium claim shall be determined on the assumption that the company owned by the consortium has made a claim under section [F3 393A(1)] requiring the loss to be so set off.

(11) Where the company referred to in subsection (10) above is a group/consortium company, the amount of the loss shall be determined under that subsection before any reduction is made under section 405(1) to (3).

Textual Amendments

F1 Words in s. 403(1) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 73(3)-(5), Sch. 15 para. 13(1)

F2 Words in s. 403(2) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 73(3)-(5), Sch. 15 para. 13(2)

F3 Words in s. 403(10) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 73(3)-(5), Sch. 15 para. 13(3)

Modifications etc. (not altering text)

C1 S. 403(1) modified (with effect in accordance with s. 105(1) of the modifying Act) by Finance Act 1996 (c. 8), Sch. 8 para. 2(2) (with Sch. 15)

C2 S. 403(1) modified (27.7.1993 with effect as mentioned in s. 165 of the amending Act) by 1993 c. 34, ss. 131(3), 165

C3 See—1970(M) ss.41 A/B/C—determinations of corporation tax in relation to accounting periods ending after the day to be appointed for the purposes of 1988 s.10.1990(C) ss.30-31, 61—circumstances when s.403(3)does not apply to postponed allowances.

C4 See 1970(M) ss.41A/B/C—determinations of corporation tax in relation to accounting periods ending after the day to be appointed for the purposes of 1988 s.10.

Marginal Citations

M1 Source—1970 s.259(1)

M2 Source—1970 s.259(2)-(7)

M3 Source—1970 s.259(8); 1981 s.40(3)

M4 Source—1985 Sch.9 4