Finance Act 1967

Section 20.

SCHEDULE 10 Group Relief

Trading losses

1 (1) If in any accounting period ending after the passing of this Act the one company has incurred a loss, computed as for the purposes of section 58(2) of the [1965 c. 25.] Finance Act 1965 (set-off of loss against total profits), in carrying on a trade, the amount of the loss may be set off for purposes of corporation tax against the total profits of the other company for its corresponding accounting period.

(2) Sub-paragraph (1) above shall not apply to so much of a loss as is excluded from the said section 58(2) by subsection (4) of that section (trades falling under Case V of Schedule D, trades not carried on on a commercial basis, etc.), or by section 22 of this Act.

(3) In the case of a claim made by a company as a member of a consortium only a fraction of the amount of the loss may be set off under sub-paragraph (1) above, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under paragraph 6(2) of this Schedule.

Capital allowances

2 (1) If for any accounting period ending after the passing of this Act any capital allowances fall to be made to the one company which are to be given by discharge or repayment of tax and are to be available primarily against a specified class of income, so much of the amount of those capital 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 other company for its corresponding accounting period.

(2) In the case of a claim made by a company as a member of a consortium only a fraction of the excess referred to in sub-paragraph (1) above may be so set off, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under paragraph 6(2) of this Schedule.

Expenses of management

3 (1) If for any accounting period ending after the passing of this Act the one company (being an investment company) may under section 57(1) of the [1965 c. 25.] Finance Act 1965 deduct any amount as expenses of management disbursed for that accounting period, so much of that amount (exclusive of any amount only deductible by virtue of subsection (2) of the said section 57) 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 other company (whether an investment company or not) for its corresponding accounting period.

(2) The surrendering company's profits of the period shall be determined for the purposes of this paragraph without any deduction under the said section 57 and without regard to any deduction falling to be made in respect of losses or allowances of any other period.

(3) References in this paragraph to section 57 of the Finance Act 1965 do not include references to that section as applied by section 69 of that Act to companies carrying on life assurance business.

(4) In the case of a claim made by a company as a member of a consortium only a fraction of the amount of the excess referred to in sub-paragraph (1) above may be set off under that sub-paragraph, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under paragraph 6(2) of this Schedule.

Charges on income

4 (1) If in any accounting period ending after the passing of this Act the one 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 purposes of corporation tax against the total profits of the other company for its corresponding accounting period.

(2) The surrendering company's profits of the period shall be determined for the purposes of this paragraph without regard to any deduction falling to be made in respect of losses or allowances of any other period, or to expenses of management only deductible by virtue of subsection (2) of section 57 of the [1965 c. 25.] Finance Act 1965.

(3) In the case of a claim made by a company as a member of a consortium only a fraction of the excess referred to in sub-paragraph (1) above may be set off under that sub-paragraph, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under paragraph 6(2) of this Schedule.

Relation of group relief to other relief

5 (1) Group relief for an accounting period shall be allowed as a deduction against the claimant company's total profits for the period before reduction by any relief derived from a subsequent accounting period, but as reduced by any other relief from tax.

(2) The said other relief shall be determined on the assumption that the company makes all relevant claims under section 58(2) and section 56(6) of the Finance Act 1965 (set-off of trading losses and capital allowances against total profits).

(3) The said other relief includes relief under section 52(1) of the Finance Act 1965 (charges on income), and notwithstanding the requirement in the said section 52(1) that the relief is to be against total profits as reduced by any other relief, group relief shall not affect relief under the said section 52(1).

(4) For the purposes of this paragraph " relief derived from a subsequent accounting period " means—

(a) relief under section 58(2) of the Finance Act 1965 in respect of a loss incurred in an accounting period after the accounting period the profits of which are being computed, and

(b) relief under section 56(6) of that Act in respect of capital allowances falling to be made for an accounting period after the accounting period the profits of which are being computed, and

(c) relief under section 87 of that Act (transitional relief on cessation of trade etc.) where the company ceases to possess the source of income in question at a time after the end of the accounting period the profits of which are being computed, and

(d) relief under section 59 of that Act (terminal loss in a trade) in respect of a loss incurred in an accounting period after the end of the accounting period the profits of which are being computed.

(5) The reductions to be made in total profits of an accounting period against which any relief derived from a subsequent accounting period is to be set off shall include any group relief for that first-mentioned accounting period, and this sub-paragraph shall have effect notwithstanding that under section 87(3) of the [1965 c. 25.] Finance Act 1965 relief under that section is to be given in priority to any other relief.

Corresponding accounting periods

6 (1) For the purposes of this Schedule any accounting period of the claimant company which falls wholly or partly within an accounting period of the surrendering company corresponds to that accounting period.

(2) If an accounting period of the surrendering company and a corresponding accounting period of the claimant company do not coincide—

(a) the amount which may be set off against the total profits of the claimant company for the corresponding accounting period shall be reduced by applying the fraction (if that fraction is less man unity), and

(b) the said profits against which the amount mentioned in paragraph (a) above (as reduced where so required) may be set off shall be reduced by applying the fraction (if that fraction is less than unity),

where

• " A " is the length of the period common to the two accounting periods,

• " B " is the length of the accounting period of the surrendering company, and

• " C " is the length of the corresponding accounting period of the claimant company.

Companies joining or leaving group or consortium

7 Subject to paragraph 8 below, group relief shall be given if, and only if, the surrendering company and the claimant company are members of the same group, or fulfil the conditions for relief for a consortium, throughout the whole of the surrendering company's accounting period to which the claim relates, and throughout the whole of the corresponding accounting period of the claimant company.

8 (1) This paragraph has effect where on any occasion two companies become or cease to be members of the same group.

(2) For the purposes specified below it shall be assumed as respects each company that on that occasion (unless a true accounting period of the company begins or ends then) an accounting period of the company ends, and a new one begins, the new accounting period to end with the end of the true accounting period (unless before then there is a further break under this sub-paragraph), and—

(a) that the losses or other amounts of the true accounting period are apportioned to the component accounting periods on a time basis according to their lengths, and

(b) that the amount of total profits for the true accounting period of the company against which group relief may be allowed in accordance with paragraph 5(1) of this Schedule is also so apportioned to the component accounting periods.

(3) Where the one company is the surrendering company and the other company is the claimant company—

(a) references to accounting periods, to profits, and to losses, allowances, expenses of management or charges on income of the surrendering company, in paragraphs 1 to 4 of this Schedule shall be construed in accordance with sub-paragraph (2) above,

(b) references to accounting periods in paragraphs 6 and 7 of this Schedule shall be so construed (so that if the two companies are members of the same group in the surrendering company's accounting period, they must under paragraph 6 also be members of the same group in any corresponding accounting period of the claimant company),

(c) references to profits, and amounts to be set off against the profits, in the said paragraph 6 shall be so construed (so that an amount apportioned under sub-paragraph (2) above to a component accounting period may fall to be reduced under the said paragraph 6(2)).

(4) This paragraph shall apply with the necessary modifications where a company begins or ceases to fulfil the conditions for relief for a consortium, either as a surrendering company or as a claimant company, as it applies where two companies become or cease to be members of the same group.

Exclusion of double allowances, etc.

9 (1) Relief shall not be given more than once in respect of the same amount, whether by giving group relief and by giving some other relief (in any accounting period) to the surrendering company, or by giving group relief more than once.

(2) In accordance with sub-paragraph (1) above, two or more claimant companies cannot, in respect of any one loss or other amount for which group relief may be given, and whatever their accounting periods corresponding to that of the surrendering company, obtain in all more relief than could be obtained by a single claimant company whose corresponding accounting period coincided with the accounting period of the surrendering company.

(3) If claims for group relief are made by more than one claimant company which relate to the same accounting period of the same surrendering company, and—

(a) all the claims so made are admissible only by virtue of paragraph 8 above, and

(b) there is a part of the surrendering company's accounting period during which none of those claimant companies is a member of the same group as the surrendering company,

those claimant companies shall not obtain in all more, relief than could be obtained by a single claimant company which was not a member of the same group as the surrendering company during that part of the surrendering company's accounting period (but was a member during the remainder of that accounting period).

(4) If claims for group relief are made by a claimant company as respects more than one surrendering company for group relief to be set off against its total profits for any one accounting period, and—

(a) all the claims so made are admissible only by virtue of paragraph 8 above, and

(b) there is a part of the claimant company's accounting period during which none of the surrendering companies by reference to which the claims are made is a member of the same group as the claimant company,

the claimant company shall not obtain in all more relief to be set off against its profits for the accounting period than it could obtain on a claim as respects a single surrendering company (with unlimited losses and other amounts eligible for relief) which was not a member of the same group as the claimant company during that part of the claimant company's accounting period (but was a member during the remainder of that accounting period).

(5) The provisions of this sub-paragraph have effect as respects a claim for group relief made by a company as a member of a consortium, in this sub-paragraph referred to as a " consortium claim "—

(a) a consortium claim, and a claim other than a consortium claim, shall not both have effect as respects the loss or other amount of the same accounting period of the same surrendering company, unless each of the two claims is as respects a loss or other amount apportioned under paragraph 8(2)(a) above to a component of that accounting period, and the two components do not overlap.

(b) in sub-paragraphs (3) and (4) above consortium claims shall be disregarded,

and paragraph (a) above shall take effect according to the order in which claims are made.

(6) Without prejudice to the provisions of section 331(5) of the [1952 c. 10.] Income Tax Act 1952, any reference in Part X of that Act to an allowance made includes a reference to an allowance which would be made but for the granting of group relief, or but for that and but for an insufficiency of profits or other income against which to make it.

Claims and adjustments

10 (1) A claim for relief under this Schedule—

(a) need not be for the full amount available,

(b) shall require the consent of the surrendering company notified to the inspector in such form as the Board may require, and

(c) must be made within two years from the end of the surrendering company's accounting period to which the claim relates.

(2) A claim for group relief by a company as a member of a consortium shall require the consent of each other member of the consortium, notified to the inspector in such form as the Board may require, in addition to the consent of the surrendering company.

(3) If the inspector discovers that any group relief which has been given is or has become excessive he may make an assessment to tax under Case VI of Schedule D in the amount which ought in his opinion to be charged.

This sub-paragraph is without prejudice to the making of an assessment under section 5(3)(c) of the [1964 c. 37.] Income Tax Management Act 1964, and to the making of all such other adjustments by way of discharge or repayment of tax or otherwise as may be required where a claimant company has obtained too much relief, or a surrendering company has forgone relief in respect of a corresponding amount.

The three-year surplus

11 Paragraphs 1 to 5 and 9 of this Schedule (as they relate either to a surrendering company or to a claimant company) shall not affect the calculation of the three-year surplus under section 85(6) of the [1965 c. 25.] Finance Act 1965 as amended by Schedule 7 to the [1966 c. 18.] Finance Act 1966.

Companies with overseas trading income

12 If under paragraph 3(4)(b) of Schedule 20 to the Finance Act 1965 the appropriate fraction of a loss incurred by one company is set off (for the purposes of section 84(3) of that Act) against income of another company, group relief in respect of that part of the loss shall be left out of account in any computation under the said section 84(3) as respects that other company or any other company.

Cancellation of tax advantages from certain transactions in securities

13 (1) The reference in section 28(2)(a) of the [1960 c. 44.] Finance Act 1960 to a person being entitled by reason of any exemption from tax to recover tax in respect of dividends received by him shall include a reference to his being so entitled by reason of the giving of group relief.

(2) Where a company in the circumstances mentioned in section 28(2)(b) of that Act becomes entitled to a deduction as there mentioned, that section shall apply in relation to any tax advantage which in consequence of that deduction is obtained or obtainable by another company by way of group relief, as if obtained or obtainable by the other company in circumstances falling within the said paragraph (b).