SCHEDULE 9 Loan relationships: special computational provisions
F1F2Impairment losses and consortium relief
5A
(1)
This paragraph applies where the conditions in sub-paragraphs (2) and (3) below are satisfied.
(2)
The first condition is that F3an impairment loss is or has been brought into account for the purposes of this Chapter for any group accounting period by—
(a)
a company (“the member company”) which is a member of a consortium by which a consortium company is owned; or
(b)
a company (a “group member”) which is a member of the same group of companies as the member company but is not itself a member of the consortium.
(3)
The second condition is that the debit is or was in respect of a creditor relationship of the member company or group member and—
(a)
the consortium company, or
(b)
if that company is a holding company, a consortium company which is a subsidiary of that company,
is or, as the case may be, was the debtor (“the debtor consortium company”).
(4)
Any reference in this paragraph to a “relevant creditor relationship” is a reference to a creditor relationship (whether of the member company or a group member) which falls within sub-paragraph (3) above.
(5)
For the purposes of this paragraph there is for any group accounting period a “relevant net debit” in relation to the relevant creditor relationships if—
(a)
the total of the F4impairment losses brought into account for that period in respect of those relationships by—
(i)
the member company, and
(ii)
every group member,
exceeds
(b)
the total of any related debt recovery credits so brought into account by those companies for that period in respect of those relationships,
and the amount of the relevant net debit is the amount of that excess.
(6)
Where there is for any group accounting period a relevant net debit in relation to the relevant creditor relationships, the amount of the relevant net debit shall be reduced by so much of any amount which—
(a)
may be surrendered as group relief by the debtor consortium company, and
(b)
is claimed as group relief for that accounting period by the member company or any group member,
as does not exceed the amount of the relevant net debit.
(7)
Where a relevant net debit falls to be reduced under sub-paragraph (6) above by any amount (“the relevant reduction”), each of the debits brought into account in determining the relevant net debit shall be reduced by an amount found by apportioning between those debits, in proportion to their respective amounts, the amount of the relevant reduction.
(8)
For the purposes of this paragraph there is for any group accounting period a “” in relation to the relevant creditor relationships if—
(a)
the total amount of any related debt recovery credits brought into account under paragraph 5 above for the period in respect of those relationships by—
(i)
the member company, and
(ii)
every group member,
exceeds
(b)
the total of the F5impairment losses brought into account for that period in respect of those relationships by those companies.
(9)
Where there is for any group accounting period a surplus of related debt recovery credits in relation to the relevant creditor relationships, each of the related debt recovery credits falling to be brought into account F6... in respect of those relationships shall be reduced (but not below nil) by the appropriate amount.
For the purposes of this sub-paragraph “the appropriate amount” is the amount found by apportioning between those related debt recovery credits, in proportion to their respective amounts, the cumulative net sub-paragraph (6) reduction for earlier group accounting periods in respect of the relevant creditor relationships.
(10)
In this paragraph, for any group accounting period the cumulative net sub-paragraph (6) reduction for earlier group accounting periods in respect of the relevant creditor relationships is—
(a)
the total amount by which the relevant net debits in respect of those relationships for any previous group accounting periods have been reduced by virtue of sub-paragraph (6) above; less
(b)
so much of that total amount as has been previously apportioned under sub-paragraph (9) above.
(11)
Any reference in this paragraph to a “relevant claim for group relief” is a reference to a claim by the member company or a group member for group relief in respect of an amount which may be surrendered as group relief by the debtor consortium company.
(12)
Any relevant claim for group relief for a group accounting period shall be reduced by so much of the cumulative net amount of relevant net debits for earlier group accounting periods in respect of the relevant creditor relationships as does not exceed the total amount of the claim.
Where there are two or more such claims for the same group accounting period which in total exceed that cumulative net amount, each of them shall be reduced by an amount found by apportioning that cumulative net amount between them in proportion to their respective amounts.
(13)
In this paragraph, for any group accounting period the cumulative net amount of relevant net debits for earlier group accounting periods in respect of the relevant creditor relationships is the total amount of the relevant net debits for those earlier periods in respect of those relationships, after any reductions falling to be made under this paragraph in the amounts of those relevant net debits.
(14)
If there is for any group accounting period—
(a)
a relevant claim for group relief (as reduced by virtue of sub-paragraph (12) above, where applicable), and
(b)
no relevant net debit in respect of the relevant creditor relationships,
the claim (as so reduced) shall be carried forward and treated for the purposes of F7sub-paragraph (6) above as increasing any relevant claim for group relief made by the claimant company for its next accounting period (or, if there is no other relevant claim for group relief made by that company for that period, as the relevant claim for group relief by that company for that period).
(15)
Where—
F8(a)
the debtor consortium company has, in accordance with an amortised cost basis of accounting, brought into account for an accounting period an amount in respect of a release of any liability under a debtor relationship, and
(b)
the corresponding creditor relationship is a relevant creditor relationship,
an equal amount shall be treated for the purposes of this paragraph as not being a debit brought into account for that period F9... in relation to the creditor relationship.
(16)
Where section 403C of the Taxes Act 1988 (amount of relief in consortium cases) applies, effect shall be given to that section before effect is given to this paragraph.
(17)
In this paragraph “group accounting period” means—
(a)
any accounting period of the member company beginning on or after 1st October 2002, or
(b)
any accounting period of a group member which begins on or after that date and corresponds to such an accounting period of the member company,
and any such accounting period of the member company and any such corresponding accounting periods of one or more group members shall be regarded for the purposes of this paragraph as being the same accounting period.
(18)
For the purposes of this paragraph an accounting period of a group member corresponds to an accounting period of the member company if—
(a)
the two accounting periods coincide;
(b)
the accounting period of the member company includes more than half of the accounting period of the group member; or
(c)
the accounting period of the member company includes part of the accounting period of the group member, but the remainder of that period does not fall within any accounting period of the member company.
(19)
In this paragraph—
“consortium claim” means a claim for group relief made by virtue of section 402(3) of the Taxes Act 1988;
“consortium company” means a company falling within any of paragraphs (a) to (c) of section 402(3) of the Taxes Act 1988 (surrender of relief between members of consortia);
“cumulative net amount of relevant net debits” shall be construed in accordance with sub-paragraph (13) above;
“cumulative net sub-paragraph (6) reduction” shall be construed in accordance with sub-paragraph (10) above;
“debtor consortium company” shall be construed in accordance with sub-paragraph (3) above;
“group accounting period” shall be construed in accordance with sub-paragraphs (17) and (18) above;
“group member” shall be construed in accordance with sub-paragraph (2)(b) above;
“group relief” has the meaning given by section 402(1) of the Taxes Act 1988;
“holding company” means a company falling within section 402(3)(c) of the Taxes Act 1988;
“member”, in relation to a consortium, has the same meaning as in Chapter 4 of Part 10 of the Taxes Act 1988 (group relief);
“member company” shall be construed in accordance with sub-paragraph (2)(a) above;
“”, in relation to a group accounting period, means a credit falling to be brought into account for the purposes of this Chapter for that period by the member company or a group member F10in connection with a debt owed by the debtor consortium company;
“relevant claim for group relief” shall be construed in accordance with sub-paragraph (11) above;
“relevant creditor relationship” shall be construed in accordance with sub-paragraph (4) above;
“relevant net debit” shall be construed in accordance with sub-paragraph (5) above;
“subsidiary”, in relation to a company which is a holding company, means a company falling within section 402(3)(b) of the Taxes Act 1988 by reference to that holding company;
“” shall be construed in accordance with sub-paragraph (9) above;
“surrendering company” has the meaning given by section 402(1) of the Taxes Act 1988.
(20)
Any reference in this paragraph to two companies being members of the same group of companies is a reference to their being members of the same group of companies for the purposes of Chapter 4 of Part 10 of this Act (group relief).
(21)
Any reference in this paragraph to a company being owned by a consortium shall be construed in accordance with section 413(6) of the Taxes Act 1988.