Income and Corporation Taxes Act 1988

Trading losses and group relief etc.

1 (1) In any case where—

(a) an amount of chargeable profits is apportioned to a company resident in the United Kingdom, and

(b) the company is entitled, or would on the making of a claim be entitled, in computing its profits for the appropriate accounting period, to a deduction in respect of any relevant allowance, and

(c) for the appropriate accounting period the company has no profits against which a deduction could be made in respect of that allowance or, as the case may be, the amount of that allowance exceeds the profits against which a deduction falls to be made in respect of it,

then, on the making of a claim, a sum equal to corporation tax at the appropriate rate on so much of the relevant allowance or, as the case may be, of the excess of it referred to in paragraph (c) above as is specified in the claim shall be set off against the company’s liability to tax under section 747(4)(a) in respect of the chargeable profits apportioned to it.

(2) In this paragraph—

(a) “the appropriate accounting period” means the accounting period for which, by virtue of section 754(2), the company is regarded as assessed to corporation tax in respect of the chargeable profits concerned; and

(b) “the appropriate rate” means the rate of corporation tax applicable to profits of the appropriate accounting period or, if there is more than one such rate, the average rate over the whole accounting period.

(3) In this paragraph “relevant allowance” means—

(a) any loss to which section 393(2) applies;

(b) any charge on income to which section 338(1) applies;

(c) any expenses of management to which section 75(1) applies;

(d) so much of any allowance to which section 74 of the 1968 Act applies as falls within subsection (3) of that section; and

(e) any amount available to the company by way of group relief.

(4) In any case where, for the appropriate accounting period, an amount would have been available to the company by way of group relief if a claim had been made under section 412, such a claim may be made for the purposes of this paragraph at any time before the end of the accounting period following that in which the assessment under section 747(4)(a) is made, notwithstanding that the period of two years referred to in section 412(1)(c) has expired.

(5) Where, by virtue of sub-paragraph (1) above, a sum is set off against a liability to tax, so much of the relevant allowance as gives rise to the amount set off shall be regarded for the purposes of the Tax Acts as having been allowed as a deduction against the company’s profits in accordance with the appropriate provisions of those Acts.

(6) In its application to a claim under this paragraph, section 43 of the Management Act (time limit for making claims) shall have effect as if, in subsection (2)—

(a) any reference to an assessment to income tax were a reference to an assessment under section 747(4)(a); and

(b) any reference to a year of assessment were a reference to an accounting period.