Corporation Tax Act 2010

[F1 CHAPTER 4 U.K. Limitations on relief: claims under section 188CB

Textual Amendments

F1 Pt. 5A inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 23

Introduction U.K.

188DA Overview U.K.

This Chapter sets out limitations on the amount of relief which may be given on a claim under section 188CB.

General limitation on amount of relief U.K.

188DB Limitation on amount of relief applying to all claims under section 188CB U.K.

(1) The amount of group relief for carried-forward losses to be given on a claim under section 188CB (“the current claim”) is limited to whichever is the lesser of—

(a) the amount mentioned in subsection (2), and

(b) the amount mentioned in subsection (3).

(2) The amount referred to in subsection (1)(a) is the unused part of the surrenderable amounts (see section 188DC).

(3) The amount referred to in subsection (1)(b) is the difference between—

(a) the claimant company's relevant maximum for the overlapping period (see section 188DD), and

(b) the amount of previously claimed group relief for carried-forward losses for the overlapping period (see section 188DE).

188DC Unused part of the surrenderable amounts U.K.

(1) The unused part of the surrenderable amounts is the amount equal to—

(a) the surrenderable amount for the overlapping period (see subsection (2)), less

(b) the amount of prior surrenders for that period (see subsections (3) to (5)).

(2) To determine the surrenderable amount for the overlapping period—

(a) take the proportion of the surrender period included in the overlapping period, and

(b) apply that proportion to the surrenderable amounts for the surrender period.

The surrenderable amount for the overlapping period is the amount given as a result of paragraph (b).

(3) To determine the amount of prior surrenders for the overlapping period—

(a) identify any prior claims for the purposes of this section (see subsection (4)), and

(b) take the steps set out in subsection (5) in relation to each such claim.

The amount of prior surrenders for the overlapping period is the total of the previously used amounts given at step 3 in subsection (5) for all the prior claims.

(4) A claim is a prior claim for the purposes of this section if—

(a) it is either—

(i) a claim under section 188CB by any company which relates to the same amounts as the current claim, or

(ii) a claim under section 188CC by any company which relates to amounts included in the amounts to which the current claim relates,

(b) it is made before the current claim, and

(c) it has not been withdrawn.

(5) These are the steps referred to in subsection (3)(b) to be taken in relation to each prior claim.

• Step 1 Identify the overlapping period for the prior claim.

• Step 2 Identify any period that is common to the overlapping period for the current claim and the overlapping period for the prior claim. If there is a common period, go to step 3. If there is no common period, there is no previously used amount in relation to the prior claim (and ignore step 3).

• Step 3 Determine the previously used amount of group relief for carried-forward losses in relation to the prior claim (see subsection (6)).

(6) To determine the previously used amount of group relief for carried-forward losses in relation to a prior claim—

(a) take the proportion of the overlapping period for the prior claim that is included in the common period identified at step 2 in relation to that claim, and

(b) apply that proportion to the amount of group relief for carried-forward losses given on the prior claim.

The previously used amount of group relief for carried-forward losses in relation to the prior claim is the amount given as a result of paragraph (b).

(7) For the meaning of the “overlapping period” see section 188DG.

188DD Claimant company's relevant maximum for overlapping period U.K.

(1) The claimant company's relevant maximum for the overlapping period is determined as follows—

• Step 1 Calculate the claimant company's relevant maximum for the claim period in accordance with section 269ZD(4).

• Step 2 Deduct from that amount the sum of—

  (a)

  any deductions made by the company for the claim period

  (i)

  under section 45(4)(b) or 45B(4), or

  (ii)

  under section 303B or 303D by virtue of section 304(5),

  (b)

  any deductions made by the company for the claim period under section 457(3) or 463H(5) of CTA 2009,

  (c)

  any deductions made by the company for the claim period under section 124(5), 124A(5) or 124C(6) of FA 2012, and

  (d)

  any deductions made by the company for the claim period which are deductions within any of paragraphs (a) to (i) and (k) of section 269ZD(3).

• Step 3 Take the proportion of the claim period included in the overlapping period and apply that proportion to the amount arrived at under step 2.

(2) In step 2 of subsection (1)—

(a) in paragraph (a)(i), the references to deductions under section 45(4)(b) or 45B(4) do not include deductions that would be ignored for the purposes of section 269ZB by reason of—

(i) section 1209(3), 1210(5A) or 1211(7A) of CTA 2009 (losses of film trade),

(ii) section 1216DA(3), 1216DB(5A) or 1216DC(7A) of that Act (losses of television programme trade),

(iii) section 1217DA(3), 1217DB(5A) or 1217DC(7A) of that Act (losses of video game trade),

(iv) section 1217MA(3) or 1217MC(9) of that Act (losses of theatrical trade),

(v) section 1217SA(3) or 1217SC(9) of that Act (losses of orchestral trade),

(vi) section 1218ZDA(3) or 1218ZDC(9) of that Act (losses of museum or gallery exhibition trade),

(vii) section 65(4B) or 67A(5A) (losses of UK or EEA furnished holiday lettings business),

(viii) section 269ZJ(1) (insurance companies: shock losses),

(ix) section 304(7) (certain losses of ring fence trades), or

(x) section 356NJ(2) (pre-1 April 2017 loss arising from oil contractor activities);

(b) in paragraph (b) the reference to a deduction under section 463H(5) does not include the deduction of a shock loss.

(3) If the amount of the claimant company's [F2 qualifying] profits for the claim period (calculated in accordance with [F3 subsection (3A)]) is less than the amount of the claimant company's deductions allowance for the claim period (determined in accordance with section [F4 269ZDA]), subsection (1) has effect as if step 1 was modified as follows—

Step 1 Calculate the claimant company's [F2 qualifying] profits for the claim period in accordance with [F3 subsection (3A)].

[F5 (3A) The claimant company’s “qualifying profits” for the claim period are—

(a) the amount given by paragraph (1) of step 1 in section 269ZF(3) in determining the company’s [F6 modified total profits] for the period, less

(b) the amount given by paragraph (1) of step 2 in section 269ZF(3) [F7 which could be relieved against] those profits for the period.]

F8 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) Subsection (2) is to be ignored if subsection (3) applies.

Textual Amendments

F2 Word in s. 188DD(3) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 24(2)(a)

F3 Words in s. 188DD(3) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 24(2)(b)

F4 Word in s. 188DD(3) substituted (with effect in accordance with Sch. 8 para. 18 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 7(2)

F5 S. 188DD(3A) inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 24(3)

F6 Words in s. 188DD(3A)(a) substituted (with effect in accordance with Sch. 8 para. 18 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 7(3)(a)

F7 Words in s. 188DD(3A)(b) substituted (with effect in accordance with Sch. 8 para. 18 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 7(3)(b)

F8 S. 188DD(4) omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 2

Modifications etc. (not altering text)

C1 S. 188DD excluded (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 194(2)

188DE Previously claimed group relief for carried-forward losses U.K.

(1) To determine the amount of previously claimed group relief for carried-forward losses for the overlapping period—

(a) identify any prior claims for the purposes of this section (see subsection (2)), and

(b) take the steps set out in subsection (3) in relation to each such claim.

The amount of previously claimed group relief for carried-forward losses for the overlapping period is the total of the previously claimed amounts given at step 3 in subsection (3) for all the prior claims.

(2) A claim is a prior claim for the purposes of this section if—

(a) it is a claim under section 188CB or 188CC by the claimant company for group relief for carried-forward losses which would be given by way of a deduction from the company's total profits of the claim period,

(b) it is made before the current claim, and

(c) it has not been withdrawn.

(3) These are the steps referred to in subsection (1)(b) to be taken in relation to each prior claim.

• Step 1 Identify the overlapping period for the prior claim.

• Step 2 Identify any period that is common to the overlapping period for the current claim and the overlapping period for the prior claim. If there is a common period, go to step 3. If there is no common period, there is no previously claimed amount in relation to the prior claim (and ignore step 3).

• Step 3 Determine the previously claimed amount of group relief for carried forward losses in relation to the prior claim (see subsection (4)).

(4) To determine the previously claimed amount of group relief for carried-forward losses in relation to a prior claim—

(a) take the proportion of the overlapping period for the prior claim that is included in the common period identified at step 2 in relation to that claim, and

(b) apply that proportion to the amount of group relief for carried-forward losses given on the prior claim.

The previously claimed amount of group relief for carried-forward losses in relation to the prior claim is the amount given as a result of paragraph (b).

188DF Sections 188DC to 188DE: supplementary U.K.

(1) If two or more claims for group relief for carried-forward losses are made at the same time, for the purpose of section 188DC and 188DE treat the claims as made—

(a) in such order as the company making them may elect or the companies making them may jointly elect, or

(b) if no such election is made, in such order as an officer of Revenue and Customs may direct.

(2) For the purpose of step 3 in each of section 188DC(5) and 188DE(3) the amount of group relief for carried-forward losses given on a prior claim is determined on the basis that relief is given on the claim before it is given on any later claim.

(3) If the use of any proportion mentioned in subsection (4), would, in the circumstances of a particular case, produce a result that is unjust or unreasonable, the proportion is to be modified so far as necessary to produce a result that is just and reasonable.

(4) The proportions are those found in—

(a) section 188DC(2),

(b) section 188DC(6),

(c) step 3 in section 188DD(1), and

(d) section 188DE(4)

188DG Sections 188DC and 188DE: meaning of “the overlapping period” U.K.

(1) In sections 188DC and 188DE “the overlapping period”, in relation to a claim for group relief for carried-forward losses, means the period that is common to the claim period and the surrender period (see Requirement 2 in section 188CB(3) and Requirement 2 in section 188CC(3)).

(2) But if during any part of the overlapping period the relief condition is not met, that part is treated as not forming part of the overlapping period but instead as forming—

(a) a part of the surrender period that is not included in the overlapping period, and

(b) a part of the claim period that is not included in the overlapping period.

(3) The relief condition is the condition on which the claim for group relief for carried forward losses is based, that is—

• the group condition,

• consortium condition 1,

• consortium condition 2,

• consortium condition 3, or

• consortium condition 4.

Further limitations on amount of relief if claim based on consortium conditions 1 or 2 U.K.

188DH Condition 1: ownership proportion U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CB for group relief for carried-forward losses, and

(b) the claim is based on consortium condition 1.

(2) The relief to be given on the claim is limited to the ownership proportion of the claimant company's relevant maximum for the overlapping period (see section 188DD to determine the claimant company's relevant maximum for the overlapping period).

(3) The ownership proportion is the same as the lowest of the following proportions prevailing during the overlapping period—

(a) the proportion of the ordinary share capital of the claimant company that is beneficially owned by the surrendering company,

(b) the proportion of any profits available for distribution to equity holders of the claimant company to which the surrendering company is beneficially entitled,

(c) the proportion of any assets of the claimant company available for distribution to such equity holders on a winding up to which the surrendering company would be beneficially entitled, and

(d) the proportion of the voting power in the claimant company that is directly possessed by the surrendering company.

(4) If any of the proportions in subsection (3) changes during the overlapping period, use the average of that proportion during that period.

(5) If the claimant company is owned by the consortium company as a result of section 153(3) (consortium company involving holding companies), references in subsection (3) to the claimant company are to be read as references to the holding company in question.

(6) In this section “the overlapping period” is to be read in accordance with section 188DG.

(7) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsection (3)(b) and (c).

188DI Condition 2: ownership proportion U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CB for group relief for carried-forward losses, and

(b) the claim is based on consortium condition 2.

(2) The limitation on relief in section 188DH applies in relation to the claim, but for this purpose references in section 188DH(3) to the surrendering company are to be read as reference to the link company.

188DJ Condition 2: companies in link company's group U.K.

(1) Where—

(a) the claimant company makes a claim under section 188CB, and

(b) the claim is based on consortium condition 2,

the amount of relief to be given on the claim is limited by subsections (2) and (3).

(2) There is a limit on the amount of group relief for carried-forward losses that can be given, in total, to the claimant company for the claim period on consortium claims made in relation to losses and other amounts surrendered by the link company and group companies.

(3) That limit is the same as the limit that, as a result of section 188DH(2), would apply for the purposes of a consortium claim made by the claimant company for the claim period in relation to losses or other amounts surrendered by the link company, assuming that the link company was UK related.

(4) In determining the limit that would apply as a result of section 188DH(2) it is to be assumed that the accounting period of the link company is the same as the accounting period of the claimant company.

(5) In this section—

• “consortium claim” means a claim for group relief for carried-forward losses under section 188CB,

• “group company” means a company that is a member of the same group of companies as the link company (other than the link company itself), and

• “UK related”, in relation to a company, has the meaning given by section 188CJ.

188DK Conditions 1 and 2: claimant company not controlled by surrendering company etc U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CB for group relief for carried-forward losses,

(b) the claim is based on consortium condition 1, and

(c) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the surrendering company, either alone or together with one or more other companies that are members of the consortium, from controlling the claimant company.

(2) This section also applies if—

(a) the claimant company makes a claim under section 188CB for group relief for carried-forward losses,

(b) the claim is based on consortium condition 2, and

(c) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the link company, either alone or together with one or more other companies that are members of the consortium, from controlling the claimant company.

(3) Arrangements are within this subsection if—

(a) the company, either alone or together with one or more other companies that are members of the consortium, would control the claimant company, but for the existence of the arrangements, and

(b) the arrangements form part of a scheme the main purpose, or one of the main purposes, of which is to enable the claimant company to obtain a tax advantage under this Chapter.

(4) The relief to be given on the claim is to be determined as if the claimant company's relevant maximum for the overlapping period was 50% of what it would be but for this section (see section 188DD to determine the claimant company's relevant maximum for the overlapping period).

(5) In this section “the overlapping period” is to be read in accordance with section 188DG

(6) Section 1139 (“tax advantage”) applies for the purposes of this section.

188DL Conditions 1 and 2: claimant company in group of companies U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CB based on consortium condition 1 or 2, and

(b) the claimant company is a member of a group of companies.

(2) In determining the claimant company's relevant maximum for the overlapping period under section 188DD, the amount calculated at step 1 of that section is to be treated as reduced (but not below nil) by the group's potential relief.

(3) The group's potential relief is the sum of—

(a) the maximum amount of group relief for carried-forward losses that could be claimed by the claimant company for the claim period on claims under section 188CB based on the group condition, and

(b) the maximum amount of group relief under Part 5 that could be claimed by the claimant company for the claim period on claims under section 130 based on the group condition.

(4) Before determining the maximum amount of potential group relief for carried-forward losses or potential group relief under subsection (3) take account of any claim made before the claim mentioned in subsection (1) that—

(a) is a claim for group relief or group relief for carried-forward losses based on the group condition made by another member of the same group of companies as the claimant company, and

(b) is in relation to losses or other amounts surrendered.]