Finance Act 1998

29 For section 403 of the Taxes Act 1988 (losses, etc. which may be surrendered by way of group relief) substitute—

“403 Amounts which may be surrendered by way of group relief.

(1) If in an accounting period (the “surrender period”) the surrendering company has—

(a) trading losses, excess capital allowances or a non-trading deficit on its loan relationships, or

(b) charges on income, Schedule A losses, or management expenses which are available for group relief,

the amount may, subject to the provisions of this Chapter, be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(2) Trading losses, excess capital allowances and a non-trading deficit on the company’s loan relationships are eligible for surrender as group relief even if the surrendering company has other profits of the surrender period against which they could be set.

Further provision about relief in respect of amounts eligible for surrender under this subsection is contained in sections 403ZA to 403ZC.

(3) Charges on income, Schedule A losses and management expenses are available for surrender as group relief only to the extent that in aggregate they exceed the surrendering company’s gross profits for the surrender period.

Any excess surrendered shall be taken to consist first of charges on income, then Schedule A losses, and finally management expenses.

Further provision about relief in respect of amounts available for surrender under this subsection is contained in section 403ZD.

(4) This section has effect subject to—

• section 404 (limitation of group relief in relation to certain dual resident companies), and

• sections 492(8) and 494A (oil extraction activities: availability of group relief against ring fence profits).

403ZA Amounts eligible for group relief: trading losses.

(1) For the purposes of section 403 a trading loss means a loss incurred by the surrendering company in the surrender period in carrying on a trade, computed as for the purposes of section 393A(1).

(2) That section does not apply to a trading loss which would be excluded from section 393A(1) by—

(a) section 393A(3) (foreign trades and certain trades not carried on with a view to gain), or

(b) section 397 (farming and market gardening: restriction on loss relief).

(3) Where a company owned by a consortium—

(a) has in any relevant accounting period incurred a trading loss, and

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

the amount of the loss available to a member of the consortium on a consortium claim shall be determined on the assumption that the company has made a claim under section 393A(1) requiring the loss to be so set off.

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

403ZB Amounts eligible for group relief: excess capital allowances.

(1) For the purposes of section 403 excess capital allowances means capital allowances falling to be made to the surrendering company for the surrender period 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,

to the extent to which their amount exceeds the company’s income of the relevant class arising in that period.

(2) In determining the amount of the allowances falling to be made for the surrender period, no account shall be taken of any allowances carried forward from an earlier period.

(3) The amount of the company’s income of the relevant class means its amount before deduction of—

(a) losses of any other period, or

(b) capital allowances.

403ZC Amounts eligible for group relief: non-trading deficit on loan relationships.

(1) For the purposes of section 403 a non-trading deficit on its loan relationships means a deficit of the surrendering company to which section 83 of the [1996 c. 8.] Finance Act 1996 applies.

(2) Section 403 applies to such a deficit only to the extent that a claim is duly made under section 83(2) of the Finance Act 1996 for it to be treated as eligible for group relief.

403ZD Other amounts available by way of group relief.

(1) References in section 403 to charges on income, Schedule A losses and management expenses shall be construed as follows.

(2) Charges on income means the aggregate of the amounts paid by the surrendering company in the surrender period by way of charges on income.

(3) A Schedule A loss means a loss incurred by the surrendering company in the surrender period in a Schedule A business carried on by the company.

It does not include—

(a) an amount treated as such a loss by section 392A(2) (losses carried forward from earlier period), or

(b) a loss which would be excluded from section 392A by subsection (5) of that section (certain businesses not carried on with a view to gain).

(4) Management expenses means the aggregate of the amounts disbursed by the surrendering company for the surrender period which are deductible under section 75(1) (expenses of management of investment company).

It does not include an amount deductible only by virtue of section 75(3) or 392A(3) (amounts carried forward from earlier periods).

(5) References in this section to section 75 do not include that section as applied by section 76 to companies carrying on life assurance business.

403ZE Computation of gross profits.

(1) For the purposes of section 403 the surrendering company’s gross profits of the surrender period means its profits for that period—

(a) without any deduction in respect of such losses, allowances and other amounts as are mentioned in paragraph (a) or (b) of subsection (1) of that section, and

(b) without any deduction falling to be made—

(i) in respect of losses, allowances or other amounts of any other period (whether or not of a description within subsection (1) of that section), or

(ii) by virtue of section 75(3) or 392A(3) (other amounts carried forward).

(2) References in this section to section 75 do not include that section as applied by section 76 to companies carrying on life assurance business.”.