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U.K.

Corporation Tax Act 2010

2010 CHAPTER 4

An Act to restate, with minor changes, certain enactments relating to corporation tax and certain enactments relating to company distributions; and for connected purposes.

[3rd March 2010]

Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Modifications etc. (not altering text)

Part 1U.K.Introduction

1Overview of ActU.K.

(1)Part 2 is about calculation of the corporation tax chargeable on a company's profits, in particular—

(a)the rates at which corporation tax on profits is charged (see Chapter 2),

(b)ascertaining the amount of profits to which the rates of tax are applied (see Chapter 3), and

(c)the currency in which profits are to be calculated and expressed (see Chapter 4).

(2)[F1Parts 4] to 7 make provision for the following reliefs—

F2(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)relief for trade losses (see Chapters 2 and 3 of Part 4),

(c)relief for losses from property businesses (see Chapter 4 of Part 4),

(d)relief for losses on a disposal of shares (see Chapter 5 of Part 4),

(e)relief for losses from miscellaneous transactions (see Chapter 6 of Part 4),

(f)group relief (see Part 5),

[F3(fa)group relief for carried-forward losses (see Part 5A),]

(g)relief for qualifying charitable donations (see Part 6), F4...

[F5(ga)relief for expenditure on grassroots sport (see Part 6A), and]

(h)community investment tax relief (see Part 7).

[F6(2A)Part 7ZA contains provision restricting the amount of certain deductions which may be made in calculating the profits of a company on which corporation tax is chargeable.]

(3)[F7Parts 7A] to 13 make provision about special types of business and company etc, in particular—

[F8(za)banking companies (see Part 7A),]

(a)oil activities (see Part 8),

[F9(aa)oil contractor activities (see Part 8ZA),

(ab)profits arising from the exploitation of patents etc (see Part 8A),]

[F10(ac)trading profits taxable at Northern Ireland rate (see Part 8B),]

[F11(ad)restitution interest (see Part 8C),]

(b)leasing plant or machinery (see Part 9),

(c)close companies (see Part 10),

(d)charitable companies etc (see Part 11),

(e)Real Estate Investment Trusts (see Part 12),

(f)corporate beneficiaries under trusts (see Chapter 1 of Part 13),

(g)open-ended investment companies, authorised unit trusts and court investment funds (see Chapter 2 of Part 13),

F12(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i)securitisation companies (see Chapter 4 of Part 13),

(j)companies in liquidation or administration (see Chapter 5 of Part 13),

(k)banks etc in compulsory liquidation (see Chapter 6 of Part 13),

(l)co-operative housing associations and self-build societies (see Chapters 7 and 8 of Part 13), and

(m)community amateur sports clubs (see Chapter 9 of Part 13).

(4)Parts 14 to [F1321C] contain provisions relating to tax avoidance, in particular with respect to—

(a)change in company ownership (see Part 14),

[F14(aa)transfer of deductions (see Part 14A),]

[F15(ab)carried-forward losses (see Part 14B),]

(b)transactions in securities (see Part 15),

(c)factoring of income (see Part 16),

F16(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F17(da)manufactured dividends (see Part 17A),]

F18(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f)the sale and lease-back of assets (see Part 19),

(g)leasing plant or machinery (see Part 20), F19...

(h)other arrangements involving asset leasing (see Part 21) F20...

[F21(i)risk transfer schemes (see Part 21A).]

[F22(j)group mismatch schemes (see Part 21B).][F23, and

[F24(ja)tax mismatch schemes (see Part 21BA),]

(k)tainted donations made to charities (see Part 21C).]

(5)Part 22 contains miscellaneous provisions, including provision with respect to—

(a)transfers of trade without a change of ownership (see Chapter 1),

(b)transfers of trade to obtain balancing allowances (see Chapter 2),

(c)transfer of relief within partnerships (see Chapter 3),

(d)the surrender of tax refunds within groups of companies (see Chapter 4),

(e)the set off of income tax deductions against corporation tax (see Chapter 5),

(f)the assessment, collection and recovery of corporation tax from UK representatives of non-UK resident companies (see Chapter 6),

(g)the recovery of unpaid corporation tax due from non-UK resident companies (see Chapter 7), and

(h)exemptions (see Chapter 8).

(6)Part 23 contains provisions about the meaning of “distribution” and certain associated matters.

(7)Part 24 contains definitions that apply for the purposes of the Corporation Tax Acts and other general provisions that have effect for the purposes of those Acts.

(8)Part 25 contains provisions of general application, including definitions for the purposes of the Act.

(9)For abbreviations and defined expressions used in this Act, see section 1174 and Schedule 4.

Textual Amendments

F1Words in s. 1(2) substituted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 2(a)

F2S. 1(2)(a) omitted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 1 para. 2(b)

F3S. 1(2)(fa) 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. 146(2)

F4Word in s. 1(2)(g) omitted (with effect in accordance with s. 22(6) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), s. 22(2)(a)

F5S. 1(2)(ga) inserted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(2)(b)

F6S. 1(2A) 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. 146(3)

F7Words in s. 1(3) substituted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2015 (c. 11), Sch. 2 para. 4(a)

F8S. 1(3)(za) inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2015 (c. 11), Sch. 2 para. 4(b)

F9S. 1(3)(aa)(ab) inserted (retrospective to 1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 2, 6

F10S. 1(3)(ac) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 2 para. 5

F11S. 1(3)(ad) inserted (18.11.2015) (with effect in accordance with s. 38(9)-(12) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 38(2)

F13Figure in s. 1(4) substituted (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 20(a)

F14S. 1(4)(aa) inserted (with effect in accordance with Sch. 14 para. 3 of the amending Act) by Finance Act 2013 (c. 29), Sch. 14 para. 2(1)

F15S. 1(4)(ab) inserted (with effect and application in accordance with Sch. 3 Pt. 2 of the amending Act) by Finance Act 2015 (c. 11), Sch. 3 para. 2

F16S. 1(4)(d) omitted (1.1.2014) by virtue of Finance Act 2013 (c. 29), Sch. 29 paras. 42, 52(a)

F17S. 1(4)(da) inserted (1.1.2014) by Finance Act 2013 (c. 29), Sch. 29 paras. 42(b), 52

F18S. 1(4)(e) omitted (with effect in accordance with s. 81 of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 77(2) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2))

F19Word in s. 1(4)(g) omitted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by virtue of Finance Act 2010 (c. 13), Sch. 16 para. 2

F20Word in s. 1(4)(h) omitted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 5 para. 1

F21S. 1(4)(i) inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 2

F22S. 1(4)(j) inserted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 5 para. 1

F23S. 1(4)(k) and word inserted (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 20(b)

F24S. 1(4)(ja) inserted (with effect in accordance with Sch. 20 para. 6(1) of the amending Act) by Finance Act 2013 (c. 29), Sch. 20 para. 2

Part 2U.K.Calculation of liability in respect of profits

Chapter 1U.K.Introduction

2Overview of PartU.K.

(1)This Part contains provisions that relate to the calculation of the corporation tax chargeable on a company's profits of an accounting period.

(2)Chapter 2 is about the rates at which corporation tax on profits is charged.

(3)Chapter 3 is about ascertaining the amount of a company's profits of an accounting period to which the rates of corporation tax applicable to the company are applied.

(4)Chapter 4 makes provision about the currency in which a company must calculate and express its profits for corporation tax purposes.

(5)For provision about the calculation of the corporation tax payable for an accounting period see paragraph 8 of Schedule 18 to FA 1998.

Chapter 2U.K.Rates at which corporation tax on profits charged

[F253Corporation tax ratesU.K.

(1)Corporation tax is charged at the rate set by Parliament for the financial year as the main rate.

(2)Subsection (1) is subject to any provision of the Corporation Tax Acts which provides for corporation tax to be charged at a different rate.]

Textual Amendments

F25S. 3 substituted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 3

Chapter 3U.K.Calculation of amount to which rates applied

4Amount of profits to which corporation tax rates appliedU.K.

(1)In the calculation under paragraph 8(1) of Schedule 18 to FA 1998 of the amount of corporation tax payable for an accounting period of a company, the first step is to apply the rate or rates of corporation tax applicable to the profits of the company of the period on which tax is chargeable.

(2)The profits of a company of an accounting period on which corporation tax is chargeable (in this Act referred to as the company's taxable total profits of the period) are found as follows—

  • Step 1

    Find the company's total profits of the period (see subsection (3)).

  • Step 2

    Deduct from the result of Step 1 any amounts which can be relieved against the company's total profits of the period.

(3)To find a company's total profits of an accounting period take the following steps.

  • Step 1

    Find the amount in respect of which the company is chargeable for the period under the charge to corporation tax on income after any reduction required to give effect to relief from tax.

  • Step 2

    Add to the result of Step 1 any amount to be included in respect of chargeable gains in the company's total profits of the accounting period (see section 8 of TCGA 1992) after any reduction required to give effect to relief from tax.

(4)Subsections (2) and (3) are subject to the provisions of the Corporation Tax Acts.

Chapter 4U.K.Currency

The currency to be used in tax calculationsU.K.

5Basic rule: sterling to be usedU.K.

(1)For corporation tax purposes the income and chargeable gains of a company for an accounting period must be calculated and expressed in sterling.

(2)See the following sections for provision about the application of subsection (1) in certain cases where profits or losses fall to be calculated in accordance with generally accepted accounting practice—

  • section 6 (UK resident company operating in sterling and preparing accounts in another currency),

  • section 7 (UK resident company operating in currency other than sterling and preparing accounts in another currency),

  • section 8 (UK resident company preparing accounts in currency other than sterling),

  • section 9 (non-UK resident company preparing accounts in currency other than sterling).

[F26(3)See section 9C for provision about the application of subsection (1) so far as it relates to calculating chargeable gains.]

Textual Amendments

6UK resident company operating in sterling and preparing accounts in another currencyU.K.

(1)This section applies if, for a period of account, in accordance with generally accepted accounting practice, a UK resident company [F27(other than a UK resident investment company)]

(a)prepares its accounts in a currency other than sterling, and

(b)in those accounts identifies sterling as its functional currency.

[F28(1A) This section also applies if, for a period of account, a UK resident investment company—

(a)in accordance with generally accepted accounting practice, prepares its accounts in a currency other than sterling, and

(b)either—

(i)has sterling as its designated currency for that period of account (see sections 9A and 9B), or

(ii)if it does not have a designated currency for that period, in those accounts identifies sterling as its functional currency in accordance with generally accepted accounting practice.]

(2)Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as if the company prepared its accounts in sterling.

Textual Amendments

F27Words in s. 6(1) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 1(2)

F28S. 6(1A) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 1(3)

Modifications etc. (not altering text)

C3S. 6 applied (with modifications) by 2010 c. 8, s. 371SI(2) (as inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 1)

7UK resident company operating in currency other than sterling and preparing accounts in another currencyU.K.

(1)This section applies if, for a period of account, in accordance with generally accepted accounting practice—

(a)a UK resident company [F29(other than a UK resident investment company)] prepares its accounts in one currency,

(b)in those accounts it identifies another currency as its functional currency, and

(c)that other currency is not sterling.

[F30(1A) This section also applies if, for a period of account, a UK resident investment company—

(a)in accordance with generally accepted accounting practice, prepares its accounts in one currency,

(b)either—

(i)has another currency as its designated currency for that period (see sections 9A and 9B), or

(ii)if it does not have a designated currency for that period, in those accounts identifies another currency as its functional currency in accordance with generally accepted accounting practice, and

(c)that other currency is not sterling.]

(2)Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

  • Step 1

    Calculate those profits or losses in the [F31relevant] currency as if the company prepared its accounts in that currency.

  • Step 2

    Take the sterling equivalent of those profits or losses (see section 11).

(3)If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the [F32relevant] currency of the company.

[F33(4) In subsections (2) and (3) “ the relevant currency ” means the currency other than sterling referred to in subsection (1)(c) or (1A)(c). ]

Textual Amendments

F29Words in s. 7(1)(a) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(2)

F30S. 7(1A) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(3)

F31Word in s. 7(2) substituted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(4)

F32Word in s. 7(3) substituted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(5)

F33S. 7(4) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(6)

Modifications etc. (not altering text)

C4S. 7 applied (with modifications) by 2010 c. 8, s. 371SI(3) (as inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 1)

8UK resident company preparing accounts in currency other than sterlingU.K.

(1)This section applies if, for a period of account—

(a)a UK resident company prepares its accounts in a currency other than sterling (the “accounts currency”), and

(b)neither section 6 nor section 7 applies.

(2)Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

  • Step 1

    Calculate those profits or losses in the accounts currency.

  • Step 2

    Take the sterling equivalent of those profits or losses (see section 11).

(3)If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

9Non-UK resident company preparing return of accounts in currency other than sterlingU.K.

[F34(1)This section applies if a non-UK resident company within the charge to corporation tax prepares its return of accounts for a period of account in a currency other than sterling (the “accounts currency”).]

(2)Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

  • Step 1

    Calculate those profits or losses in the accounts currency.

  • Step 2

    Take the sterling equivalent of those profits or losses (see section 11).

(3)If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

(4)The reference in subsection (1) to the company's “return of accounts” is to a return of such accounts F35... as may be required under paragraph 3 of Schedule 18 to FA 1998 (company tax returns).

Textual Amendments

F35Words in s. 9(4) omitted (6.4.2020) by virtue of Finance Act 2019 (c. 1), Sch. 5 paras. 29(3), 35 (with Sch. 5 para. 36)

[F369A Designated currency of a UK resident investment company U.K.

(1) The designated currency of a UK resident investment company is the currency which the company elects as its designated currency.

[F37(2)An election under this section by a company (“X”) takes effect only if, at the time when it is to take effect (see section 9B(1))—

(a)X is a UK resident investment company, and

(b)Condition A or Condition B is met.]

F38(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)Condition A is that a significant proportion of X's assets and liabilities are denominated in the currency.

(5)Condition B is that—

(a)the currency is the functional currency of another company, and

(b)it is reasonable to assume that the two companies will meet the consolidation condition.

(6)X and another company (“Y”) meet the consolidation condition at any time if—

(a)for a period which includes that time, the financial results of X are comprised in financial statements of Y's group prepared in accordance with acceptable accounting practice, or

(b)if no financial statements of the group are prepared in accordance with acceptable accounting practice for a period which includes that time, the financial results of X would be comprised in financial statements of Y's group for a period which includes that time if such statements were prepared in accordance with international accounting standards.

(7)In subsection (6)—

  • financial statements of the group ” means consolidated financial statements of Y and its subsidiaries [F39(and for this purpose “subsidiaries” has the meaning given by international accounting standards)],

  • [F40Y's group” means a worldwide group of which Y is the ultimate parent within the meaning of Part 10 of TIOPA 2010,]

  • acceptable accounting practice ” means—

    (a)

    international accounting standards,

    (b)

    UK generally accepted accounting practice, or

    (c)

    accounting practice which is generally accepted in the country in which Y is resident.

(8)A currency is the designated currency of X for a period of account if the election in respect of that currency has effect throughout that period (see section 9B).

[F41(9)In relation to any period of account for which a currency is X's designated currency as a result of an election under this section, profits or losses of X that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated as if—

(a)the designated currency were the functional currency of the company, and

(b)no part of X's business could, in accordance with generally accepted accounting practice, be regarded as having another currency as its functional currency.]

Textual Amendments

F36Ss. 9A, 9B inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 3

F37S. 9A(2) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(3)

F38S. 9A(3) omitted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 34(4)

F39Words in s. 9A(7) substituted (with effect in accordance with Sch. 8 para. 28 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 27(a)

F40Words in s. 9A(7) substituted (with effect in accordance with Sch. 8 para. 28 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 27(b)

F41S. 9A(9) inserted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(5)

9BPeriod for which an election under section 9A has effectU.K.

(1)An election under [F42section 9A] takes effect at the beginning of the day specified in the election as the day on which it takes effect (which must be later than the day on which the election is made).

F43(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)An election under [F44section 9A] may be revoked by notice of the revocation being given to an officer of Revenue and Customs before the election takes effect.

(4)Subject to that, an election has effect until immediately before—

(a)the day on which another election by X takes effect, or

(b)the day on which a revocation event occurs,

(whichever first occurs).

(5)A revocation event occurs in a period of account (other than a period to which subsection (6) applies) if, at any time during that period—

(a)it is not the case that a significant proportion of X's assets and liabilities are denominated in the currency to which the election relates, and

(b)it is not the case that the currency is the functional currency of another company which, with X, met the consolidation condition (within the meaning of section 9A(6)) at any time during the preceding period of account.

(6)[F45A revocation event occurs in the period of account in which X's first accounting period begins] if—

(a)Condition A and not Condition B is satisfied at the beginning of that accounting period, and

(b)the condition in subsection (5)(a) is met at any time during the period of account but after the first accounting period begins.

[F46(6A)A revocation event also occurs in a period of account (whether or not a period to which subsection (6) applies) if, at any time during that period, X ceases to be a UK resident investment company.]

(7)Subsections (8) and (9) apply if a period of account of X (“the straddling period of account”) begins before, and ends on or after, the day on which—

(a)an election under [F47section 9A] takes effect, or

(b)a revocation event occurs.

(8)It is to be assumed, for the purposes of this Chapter, that the straddling period of account consists of two separate periods of account—

(a)the first beginning with the straddling period of account and ending immediately before that day, and

(b)the second beginning with that day and ending with the straddling period of account,

and X's profits and losses are to be computed accordingly for the purposes of corporation tax.

(9)For those purposes, it is to be assumed—

(a)that X prepares its accounts for each of the two periods in the same currency, and otherwise on the same basis, as it prepares its accounts for the straddling period of account, and

(b)that if the accounts for the straddling period of account, in accordance with generally accepted accounting practice, identify a currency as X's functional currency, the accounts for each of the two periods do likewise.

(10)In this section references to “X” are to be construed in accordance with section 9A.]

Textual Amendments

F36Ss. 9A, 9B inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 3

F42Words in s. 9B(1) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(7)

F43S. 9B(2) omitted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 34(8)

F44Words in s. 9B(3) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(9)

F45Words in s. 9B(6) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(10)

F46S. 9B(6A) inserted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(11)

F47Words in s. 9B(7)(a) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(12)

[F489CChargeable gains and losses of companiesU.K.

(1)This section applies if—

(a)a company disposes of an asset which is a ship, an aircraft, shares or an interest in shares, and

(b)at any time beginning with the company's acquisition of the asset (or, if earlier, the time allowable expenditure was first incurred in respect of the asset) and ending with the disposal, the company's relevant currency is not sterling.

(2)A company's relevant currency at any time is its functional currency at that time, subject to subsection (3).

(3)If, at any time—

(a)a company is a UK resident investment company, and

(b)the company has a designated currency (see sections 9A and 9B) which is different from its functional currency,

the company's relevant currency at that time is that designated currency.

(4)If the relevant currency of the company at the time of the disposal is not sterling, the chargeable gain or loss accruing to the company on the disposal must be calculated as follows—

  • Step 1 Calculate the chargeable gain or loss in the relevant currency of the company at the time of the disposal.

  • Step 2 Translate the amount of the chargeable gain or loss into sterling by reference to the spot rate of exchange on the day of the disposal.

(5)In any case, subsections (6) to (10) apply for the purposes of calculating the chargeable gain or loss.

(6)Where any allowable expenditure is incurred in a currency which is not the company's relevant currency at the time it is incurred, that expenditure is to be translated into that relevant currency by reference to the spot rate of exchange for the day on which it is incurred.

(7)Where, at any time after any allowable expenditure is incurred but before the asset is disposed of, there is a change in the company's relevant currency, that expenditure is to be translated (or, if it has previously been translated under this section, further translated) into the relevant currency of the company immediately following the change, by reference to the spot rate of exchange for the day of the change.

(8)Any amount of consideration for the disposal which is given in a currency other than the company's relevant currency is to be translated into that relevant currency by reference to the spot rate of exchange on the day of disposal.

(9)For the purposes of subsections (6) and (7)—

(a)any translation of expenditure under subsection (6) is to be done before any translation of the expenditure under subsection (7), and

(b)if subsection (7) applies as a result of more than one change in the company's relevant currency, it is to be applied in relation to each change in the order the changes were made (with the earliest first).

(10)Where, by virtue of any enactment, the company was at any time treated for the purposes of corporation tax on chargeable gains as acquiring the asset—

(a)for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the person disposing of the asset, or

(b)for a consideration equal to the market value of the asset,

for the purposes of this section that allowable expenditure is treated as incurred by the company at that time.

(11)For the purposes of this section, a reference to a ship or aircraft includes a reference to the benefit of a contract—

(a)to which section 67 of CAA 2001 applies, and

(b)which relates to plant or machinery which is a ship or aircraft.

(12)In this section—

  • allowable expenditure” means expenditure which, immediately before the disposal, was attributable to the asset under section 38(1)(a) to (c) of TCGA 1992;

  • interest in shares” has the same meaning as in Schedule 7AC to TCGA 1992 (see paragraph 29 of that Schedule);

  • shares” includes stock.]

Textual Amendments

Translating amounts into other currenciesU.K.

10The equivalent in another currency of a sterling amountU.K.

(1)Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(3), 8(3) or 9(3) requires a sterling amount to be translated into its equivalent expressed in another currency.

(2)The translation must be made by reference to—

(a)the average exchange rate for the accounting period, or

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

(3)That rate is—

(a)if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b)if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

11Sterling equivalents: basic ruleU.K.

(1)Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(2), 8(2) or 9(2) requires a profit or loss to be translated into its sterling equivalent.

(2)The translation must be made by reference to—

(a)the average exchange rate for the accounting period, or

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

(3)That rate is—

(a)if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b)if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

(4)Subsection (2) is subject to sections 12 and 13 (special rules where the translation is for the purpose of calculating carried-forward or carried-back amounts).

12Sterling equivalents: carried-back amountsU.K.

(1)This section applies if, for the purpose of calculating a carried-back amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2)The translation must be made in accordance with whichever of the rules 1, 2 and 3 is applicable (see the table below).

Rule 1 applies if the later tax calculation currency is the same as the earlier tax calculation currency.Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

Rule 2 applies if—

(a)

the later tax calculation currency is not the same as the earlier tax calculation currency, and

(b)

the earlier tax calculation currency is sterling.

Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the last day of the relevant accounting period.

Rule 3 applies if—

(a)

the later tax calculation currency is not the same as the earlier tax calculation currency, and

(b)

the earlier tax calculation currency is a currency other than sterling.

Rule 3 is that the loss must be translated into its sterling equivalent by—

(a)

being translated into the earlier tax calculation currency by reference to the spot rate of exchange for the last day of the relevant accounting period, and

(b)

then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

(3)In the table in subsection (2)—

  • the earlier tax calculation currency” means the tax calculation currency of the company in the accounting period to which the carried-back amount is to be carried back,

  • the later tax calculation currency” means the tax calculation currency of the company in the accounting period in which the loss arises, and

  • the relevant accounting period” means the latest accounting period of the company that both—

    (a)

    ends before the accounting period in which the loss arises, and

    (b)

    is a period in which the tax calculation currency of the company is the same as the earlier tax calculation currency.

13Sterling equivalents: carried-forward amountsU.K.

(1)This section applies if, for the purpose of calculating a carried-forward amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2)The translation must be made in accordance with whichever of rules 1, 2 and 3 is applicable (see the table below).

Rule 1 applies if the earlier tax calculation currency is the same as the later tax calculation currency.Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

Rule 2 applies if—

(a)

the earlier tax calculation currency is not the same as the later tax calculation currency, and

(b)

the later tax calculation currency is sterling.

Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the first day of the relevant accounting period.

Rule 3 applies if—

(a)

the earlier tax calculation currency is not the same as the later tax calculation currency, and

(b)

the later tax calculation currency is a currency other than sterling.

Rule 3 is that the loss must be translated into its sterling equivalent by—

(a)

being translated into the later tax calculation currency by reference to the spot rate of exchange for the first day of the relevant accounting period, and

(b)

then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

(3)In the table in subsection (2)—

  • the earlier tax calculation currency” means the tax calculation currency of the company in the accounting period in which the loss arises,

  • the later tax calculation currency” means the tax calculation currency of the company in the accounting period to which the carried-forward amount is to be carried forward, and

  • the relevant accounting period” means the earliest accounting period of the company that both—

    (a)

    begins after the accounting period in which the loss arises, and

    (b)

    is a period in which the tax calculation currency of the company is the same as the later tax calculation currency.

Adjustment of sterling lossesU.K.

14Carried-back amountsU.K.

(1)This section applies if conditions A, B and C are met.

(2)Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

(a)prepares its accounts for a period of account in sterling, or

(b)prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3)Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-back amount.

(4)Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried back (“the earlier tax calculation currency”) is a currency other than sterling.

(5)The loss must be adjusted by—

(a)first being translated into the earlier tax calculation currency by reference to the spot rate of exchange for the last day of the relevant accounting period, and

(b)then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

(6)In this section “the relevant accounting period” means the latest accounting period of the company that both—

(a)ends before the accounting period in which the loss arises, and

(b)is a period in which the tax calculation currency of the company is the currency mentioned in subsection (4).

15Carried-forward amountsU.K.

(1)This section applies if conditions A, B and C are met.

(2)Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

(a)prepares its accounts for a period of account in sterling, or

(b)prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3)Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-forward amount.

(4)Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried forward (“the later tax calculation currency”) is a currency other than sterling.

(5)The loss must be adjusted by—

(a)first being translated into the later tax calculation currency by reference to the spot rate of exchange for the first day of the relevant accounting period, and

(b)then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

(6)In this section “the relevant accounting period” means the earliest accounting period of the company that both—

(a)begins after the accounting period in which the loss arises, and

(b)is a period in which the tax calculation currency of the company is the currency mentioned in subsection (4).

InterpretationU.K.

16Sections 13(2) and 15(5): profit against which carried-forward amount to be set offU.K.

(1)This section is about the interpretation of the references in sections 13(2) and 15(5) to the profit against which a carried-forward amount is to be set off, in a case where the carried-forward amount—

(a)is one that is treated as arising in an accounting period later than that in which it in fact arises, and

(b)is accordingly deductible in calculating a profit for that later period.

(2)In such a case, the references are to be read as references to the profit in calculating which the amount is deductible, disregarding the deduction.

17Interpretation of ChapterU.K.

(1)References in this Chapter to the accounts of a UK resident company are to—

(a)the annual accounts of the company required by Part 15 of the Companies Act 2006, or

(b)if the company is not required to prepare such accounts, the accounts which it is required to keep under the law of the territory under whose laws the company is incorporated, or

(c)if the company is not required to keep accounts as mentioned in paragraph (a) or (b), those accounts of the company that most closely correspond to accounts which it would have been required to prepare if the provisions of Part 15 of the Companies Act 2006 applied to it.

(2)In this Chapter “carried-back amount” means—

(a)an amount carried back under section 37 (relief for trade losses against total profits),

[F49(aa)an amount carried back under section 45F (relief for terminal trade losses),]

(b)an amount carried back under section 389(2) of CTA 2009 (deficits of insurance companies), or

(c)an amount carried back by virtue of a claim under section 459(1)(b) [F50or 463B(1)(b)] of CTA 2009 (non-trading deficits from loan relationships).

(3)In this Chapter “carried-forward amount” means—

(a)an amount carried forward under section 45 (carry forward of [F51pre-1 April 2017] trade loss against subsequent trade profits),

[F52(aa)an amount carried forward under section 45A (carry forward of post 1-April 2017 trade loss against total profits),

(ab)an amount carried forward under section 45B (carry forward of post-1 April 2017 trade loss against subsequent trade profits),]

(b)an amount carried forward under section 62(5) (UK property business losses),

(c)an amount carried forward under section 63(3) (company with investment business ceasing to carry on a UK property business),

(d)an amount carried forward under 66(3) (overseas property business losses),

(e)an amount carried forward under section 91(6) (losses from miscellaneous transactions),

(f)an amount carried forward under [F53section 73 or 93 of FA 2012 for use at step 5 in section 76 of that Act (the I - E basis for insurance companies)],

F54(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h)an amount carried forward under section 391(2) of CTA 2009 (deficits of insurance companies),

(i)an amount carried forward under section 457(3) [F55, 463G(6) or 463H(4)] of CTA 2009 (non-trading deficits from loan relationships),

(j)an amount carried forward under section 753(3) of CTA 2009 (non-trading loss on intangible fixed assets),

(k)an amount carried forward under section 925(3) of CTA 2009 (patent income: relief for expenses), or

(l)an amount carried forward under section 1223 of CTA 2009 (expenses of management and other amounts).

[F56(3A)In this Chapter “investment company” means a company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived from those investments.]

[F57(4)References in this Chapter to the functional currency of a company or of part of a company's business are references to the currency of the primary economic environment in which the company or part operates.]

(5)References in this Chapter to the tax calculation currency of a company in an accounting period are to the currency in which profits or losses of the company arising in that period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes are required to be calculated by virtue of section 5(1), section 6(2), Step 1 of section 7(2), Step 1 of section 8(2) or Step 1 of section 9(2).

Textual Amendments

F49S. 17(2)(aa) 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. 147(2)(a)

F50Words in s. 17(2)(c) 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. 147(2)(b)

F51Words in s. 17(3)(a) 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. 147(3)(a)

F52S. 17(3)(aa)(ab) 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. 147(3)(b)

F53Words in s. 17(3)(f) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 216(a)

F54S. 17(3)(g) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 216(b)

F55Words in s. 17(3)(i) 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. 147(3)(c)

F56S. 17(3A) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 4

F57S. 17(4) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(13)

F58Part 3U.K.Companies with small profits

Textual Amendments

F58Pt. 3 omitted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 1 para. 4

F58The small profits rateU.K.

F5818Profits charged at the small profits rateU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F58Marginal reliefU.K.

F5819Marginal reliefU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5820Company with only ring fence profitsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5821Company with ring fence profits and other profitsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5822The ring fence amountU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5823The remaining amountU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F58The lower limit and the upper limitU.K.

F5824The lower limit and the upper limitU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5825Associated companiesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5826Section 25(3): treatment of certain non-trading companiesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F58 27 Attribution to persons of rights and powers of their associatesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5828Associated companies: fixed-rate preference sharesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5829Association through a loan creditorU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5830Association through a trusteeU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F58SupplementaryU.K.

F5831Power to obtain informationU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5832Meaning of “augmented profits”U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5833Interpretation of section 32(2) and (3)U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5834Close investment-holding companiesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 4U.K.Loss relief

Modifications etc. (not altering text)

C5Pt. 4 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Risk Transformation (Tax) Regulations 2017 (S.I. 2017/1271), regs. 1(1), 10

Chapter 1U.K.Introduction

35Overview of PartU.K.

(1)This Part provides corporation tax relief for—

(a)losses made in a trade (see Chapter 2 as well as the restrictions on relief in Chapter 3 relating to limited partnerships and limited liability partnerships),

(b)losses made in a UK property business or overseas property business (see Chapter 4),

(c)losses made on a disposal of certain shares (see Chapter 5), and

(d)losses made in certain miscellaneous transactions (see Chapter 6).

(2)This Part also provides for the reduction of available relief if there is a write-off of government investment in a company (see Chapter 7).

(3)For rules about the calculation of losses for the purposes of this Part, see—

(a)section 47 of CTA 2009 (losses of a trade calculated on same basis as profits), and

(b)section 210 of CTA 2009 (which applies section 47 of that Act, so that losses of a UK property business or overseas property business are calculated on the same basis as profits).

(4)See also Part 17 of CTA 2009 for rules about how to calculate the losses of a company that is a partner in a partnership.

Chapter 2U.K.Trade losses

IntroductionU.K.

36Introduction to ChapterU.K.

[F59(1)This Chapter provides relief for a loss made by a company in a trade (see sections 37 to 47)]

(2)This Chapter also provides for restrictions on relief for the following cases—

(a)farming or market gardening (sections 48 to 51),

(b)dealings in commodity futures (section 52),

(c)leasing contracts and company reconstructions (section 53), and

(d)receipts of interest, dividends and royalties by a non-UK resident company (section 54).

(3)In this Chapter references to a company carrying on a trade are references to the company carrying on the trade so as to be within the charge to corporation tax in relation to the trade.

(4)In this Chapter, except in so far as the context otherwise requires—

(a)references to a trade include an office, and

(b)references to carrying on a trade include holding an office.

Textual Amendments

F59S. 36(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 8(1)

[F60Relief in loss-making period and carry back relief]U.K.

Textual Amendments

F60S. 37 cross-heading substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 9

37Relief for trade losses against total profitsU.K.

(1)This section applies if, in an accounting period, a company carrying on a trade makes a loss in the trade.

(2)The company may make a claim for relief for the loss under this section (but see subsection (5)).

(3)If the company makes a claim, the relief is given by deducting the loss from the company's total profits of—

(a)the accounting period in which the loss is made (“the loss-making period”), and

(b)if the claim so requires, previous accounting periods so far as they fall (wholly or partly) within the period of 12 months ending immediately before the loss-making period begins.

(4)The amount of a deduction to be made under subsection (3) for any accounting period is the amount of the loss so far as it cannot be deducted under that subsection for a subsequent accounting period.

(5)The company may not make a claim if, in the loss-making period, the company carries on the trade wholly outside the United Kingdom.

(6)A deduction under subsection (3)(b) may be made for an accounting period only if the company—

(a)carried on the trade in the period, and

(b)did not do so wholly outside the United Kingdom.

(7)The company's claim must be made—

(a)within the period of two years after the end of the loss-making period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(8)If, for an accounting period, deductions under subsection (3) are to be made for losses of different accounting periods, the deductions are to be made in the order in which the losses were made (starting with the earliest loss).

(9)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Modifications etc. (not altering text)

C6S. 37 applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 123 (with s. 147, Sch. 17(34))

C7S. 37 modified by 2009 c. 4, s. 1218ZDB(2) (as inserted (for specified purposes and with effect in accordance with Sch. 6 paras. 20, 21(1)(a) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 6 para. 1 (with Sch. 6 para. 21(3)))

C8S. 37(3)(b) applied (with modifications) by 2009 c. 10, Sch. 6 para. 3(1) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 714(2) (with Sch. 2))

38Limit on deduction if accounting period falls partly within 12 month periodU.K.

(1)This section applies if an accounting period falls partly within the period of 12 months mentioned in section 37(3)(b).

(2)The amount of the deduction for the loss for the accounting period is not to exceed an amount equal to the overlapping proportion of the company's total profits of that period.

(3)The overlapping proportion is the same as the proportion that the part of the accounting period falling within the period of 12 months bears to the whole of the accounting period.

Modifications etc. (not altering text)

C9S. 38(1) applied (with modifications) by 2009 c. 10, Sch. 6 para. 3(1) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 714(2) (with Sch. 2))

C10S. 38(3) applied (with modifications) by 2009 c. 10, Sch. 6 para. 3(1) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 714(2) (with Sch. 2))

39Terminal losses: extension of periods for which relief may be givenU.K.

(1)This section applies if—

(a)a company ceases to carry on a trade, and

(b)the company has made a terminal loss in the trade.

(2)Sections 37(3)(b) and 38(1) and (3) have effect in relation to the terminal loss as if the references to 12 months were references to 3 years.

(3)The following are terminal losses made in the trade—

(a)the whole of any loss made by the company in the trade in an accounting period that begins during the final 12 months, and

(b)the overlapping proportion of any loss made by the company in the trade in an accounting period that ends, but does not begin, during the final 12 months.

(4)The overlapping proportion is the same as the proportion that the part of the accounting period falling within the final 12 months bears to the whole of the accounting period.

(5)The final 12 months” means the period of 12 months ending when the company ceases to carry on the trade.

(6)This section is subject to section 41.

40Ring fence trades: extension of periods for which relief may be givenU.K.

(1)This section applies if—

(a)in an accounting period a company makes a loss in a ring fence trade (as defined in section 162 of CAA 2001),

(b)the accounting period is an accounting period [F61for which any allowances under section 164 or [F62by virtue of section 416ZA] of CAA 2001 are made to the company in respect of decommissioning expenditure], and

(c)not all the loss is a terminal loss (see section 39(3) above).

(2)Sections 37(3)(b) and 38(1) and (3) have effect in relation to the loss (so far as it is not a terminal loss) as if the references to 12 months were references to 3 years.

(3)But if the loss exceeds [F63the sum of the allowances] mentioned in subsection (1)(b), subsection (2) applies in relation to the loss only so far as it does not exceed [F64that amount].

[F65(3A)In this section “decommissioning expenditure” has the meaning given by section 330C.]

(4)This section is subject to section 41.

Textual Amendments

F61Words in s. 40(1)(b) substituted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 5(2)

F62Words in s. 40(1)(b) substituted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(8)

F63Words in s. 40(3) substituted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 5(3)(a)

F64Words in s. 40(3) substituted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 5(3)(b)

F65S. 40(3A) inserted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 5(4)

41Sections 39 and 40: transfers of trade to obtain reliefU.K.

Sections 39 and 40 do not apply by reason of a company ceasing to carry on a trade if—

(a)on the company ceasing to carry on the trade, any of the activities of the trade begin to be carried on by a person who is not (or by persons any or all of whom are not) within the charge to corporation tax, and

(b)the company's ceasing to carry on the trade is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to secure that either or both of those sections apply in relation to a loss by reason of the cessation.

42Ring fence trades: further extension of period for reliefU.K.

(1)This section applies if—

(a)a company makes a claim under section 37 for relief in respect of a loss made in a ring fence trade,

(b)the claim is made by virtue of section 39 or 40, and

(c)a part of the loss that is eligible for relief under section 37 cannot be so relieved because there are not enough profits from which the loss may be deducted under that section.

(2)Relief for the part of the loss that cannot be relieved under section 37 (“the unrelieved loss”) is given to the company under this section.

(3)The relief is given by deducting the unrelieved loss from the profits of the ring fence trade of an accounting period that—

(a)falls wholly or partly before the three year relief period, and

(b)ends on or after 17 April 2002.

(4)The amount of a deduction to be made under subsection (3) for any accounting period is so much of the unrelieved loss as cannot be deducted under that subsection from profits of the ring fence trade of a subsequent accounting period (but this is subject to subsections (5) and (6)).

(5)In the case of an accounting period that falls partly before the 3 year relief period, the amount given by subsection (4) is to be reduced by the proportion which the part of the accounting period falling within the 3 year relief period bears to the whole of the accounting period.

(6)In the case of an accounting period that falls partly before 17 April 2002, the amount given by subsection (4) is to be reduced by the proportion which the part of the accounting period falling before that date bears to the whole of the accounting period.

(7)If, for an accounting period, deductions under subsection (3) are to be made for losses of different accounting periods, the deductions are to be made in the order in which the losses were made (starting with the earliest first).

(8)In this section—

  • ring fence trade” has the same meaning as in section 162 of CAA 2001, and

  • 3 year relief period” means the period of 3 years that applies to a claim under section 37 by virtue of section 39 or 40.

43Claim period in case of ring fence or mineral extraction tradesU.K.

(1)This section applies in relation to a claim under section 37 if—

(a)as a result of section 165 of CAA 2001 (general decommissioning expenditure after ceasing ring fence trade) a company's qualifying expenditure for the accounting period in which it ceases to carry on a ring fence trade (as defined in section 162 of that Act) is increased by any amount, or

(b)as a result of section 416 [F66or 416ZA] of CAA 2001 (expenditure on [F67site restoration ] ) any expenditure is treated as qualifying expenditure of a company incurred on the last day of trading.

(2)So far as the claim relates to the increase mentioned in subsection (1)(a), the period of two years specified in section 37(7)(a) for making the claim is instead to be read as a reference to the period given by adding two years to the post-cessation period (within the meaning of section 165 of CAA 2001).

(3)So far as the claim relates to the expenditure mentioned in subsection (1)(b), the period of two years specified in section 37(7)(a) for making the claim is instead to be read as a reference to a period of 5 years.

Textual Amendments

F66Words in s. 43(1)(b) inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(9)(a)

F67Words in s. 43(1)(b) substituted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(9)(b)

44Trade must be commercial or carried on for statutory functionsU.K.

(1)Relief under section 37 is not available for a loss made in a trade unless for the loss-making period (see section 37(3)(a)) the trade is carried on—

(a)on a commercial basis, and

(b)with a view to the making of a profit in the trade or so as to afford a reasonable expectation of making such a profit.

(2)References in subsection (1)(b) to a profit in the trade include references to a profit in any larger undertaking of which the trade forms part.

(3)If during the loss-making period there is a change in the way in which the trade is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

(4)The restriction on relief under this section does not apply if the trade is a trade carried on in the exercise of functions conferred by or under an Act (including an Act of the Scottish Parliament).

Carry forward of trade loss reliefU.K.

45Carry forward of [F68pre-1 April 2017] trade loss against subsequent trade profitsU.K.

(1)This section applies if, in an accounting period [F69beginning before 1 April 2017] , a company carrying on a trade makes a loss in the trade.

(2)Relief for the loss is given to the company under this section.

(3)The relief is given for that part of the loss for which no relief is given under section 37 or 42 (“the unrelieved loss”).

(4)For this purpose—

(a)the unrelieved loss is carried forward to subsequent accounting periods (so long as the company continues to carry on the trade), and

(b)the profits of the trade of any such period are reduced by the unrelieved loss so far as that loss [F70is not] used under this paragraph to reduce the profits of an earlier period.

[F71(4A)But the company may make a claim that the profits of the trade of an accounting period specified in the claim are not to be reduced by the unrelieved loss, or are not to be reduced by the unrelieved loss by more than an amount specified in the claim.

(4B)A claim under subsection (4A) may specify an accounting period only if it begins on or after 1 April 2017.

(4C)A claim under subsection (4A) is effective if, and only if, it is made—

(a)within the period of two years after the end of the accounting period specified in the claim, or

(b)within such further period as an officer of Revenue and Customs may allow.]

(5)In this section and [F72, sections 45B, 45F and] 46 references to profits of the trade are references to profits of the trade chargeable to corporation tax.

(6)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Textual Amendments

F68Words in s. 45 heading 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. 10(2)

F69Words in s. 45(1) 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. 10(3)

F70Words in s. 45(4)(b) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 10(4)

F71S. 45(4A)-(4C) 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. 10(5)

F72Words in s. 45(5) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 10(6)

Modifications etc. (not altering text)

C11S. 45 applied (retrospective to 1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 6, 9(1)

C12S. 45(4) excluded (with effect in accordance with Sch. 18 para. 63 of the amending Act) by Finance Act 2016 (c. 24), Sch. 18 para. 20(10)

[F7345ACarry forward of post-1 April 2017 trade loss against total profitsU.K.

(1)This section applies if—

(a)in an accounting period (“the loss-making period”) beginning on or after 1 April 2017 a company carrying on a trade makes a loss in the trade,

(b)relief under section 37 or Part 5 (group relief) is not given for an amount of the loss (“the unrelieved amount”),

(c)the company continues to carry on the trade in the next accounting period (“the later period”), and

(d)the conditions in subsection (3) are met.

(2)But this section does not apply if the trade is a ring fence trade.

(3)The conditions are that—

(a)the trade did not become small or negligible in the loss-making period,

(b)relief under section 37 was not unavailable for the loss by reason of —

(i)section 37(5), 44, 48 or 52, or

(ii)section 1209, 1216DA, 1217DA, 1217MA, 1217SA or 1218ZDA of CTA 2009,

(c)relief under section 37 would not be unavailable by reason of section 44 for a loss (assuming there was one) made in the trade in the later period,

(d)if the company is a Solvency 2 insurance company the loss is not a shock loss (see subsections (9) and (10)), and

(e)the later period is not an excluded accounting period of a general insurance company.

(4)The unrelieved amount is carried forward to the later period.

(5)The company may make a claim for relief to be given in the later period for the unrelieved amount or for any part of it specified in the claim.

(6)If the company makes a claim, the relief is given by deducting the unrelieved amount, or the specified part of it, from the company's total profits of the later period.

(7)A claim under this section must be made—

(a)within the period of two years after the end of the later period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(8)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

(9)For the purposes of this section and section 45B, a loss which is partly, but not wholly, a shock loss is to be treated as if—

(a)the amount that is a shock loss, and

(b)the amount that is not,

were separate losses.

(10)In this section—

  • excluded accounting period” has the meaning given by section 269ZG;

  • “general insurance company” is to be interpreted in accordance with section 269ZG(6);

  • ring fence trade” has the same meaning as in Part 8 (see section 277);

  • Solvency 2 insurance company” means an insurance company as defined in section 269ZP(2);

  • shock loss” has the meaning given by section 269ZK.

Textual Amendments

F73Ss. 45A-45H 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. 11

Modifications etc. (not altering text)

C13S. 45A(4) applied by 2009 c. 4, s. 1048(4B)-(4D) (as 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. 133(4))

45BCarry forward of post-1 April 2017 trade loss against trade profitsU.K.

(1)This section applies if—

(a)in an accounting period (“the loss-making period”) beginning on or after 1 April 2017 a company carrying on a trade makes a loss in the trade,

(b)relief under section 37 or 42 or Part 5 (group relief) is not given for an amount of the loss (“the unrelieved amount”),

(c)the company continues to carry on the trade in the next accounting period (“the later period”), and

(d)case 1, 2 or 3 applies.

  • Case 1 is that any of the conditions in section 45A(3) are not met.

  • Case 2 is that relief for the unrelieved amount was not available under section 45A by reason of section 1210(5), 1216DB(5) or 1217DB(5) of CTA 2009.

  • Case 3 is that the trade is a ring fence trade.

(2)The unrelieved amount is carried forward to the later period.

(3)Relief for the unrelieved amount is given to the company in the later period if the company makes a profit in the trade in the later period.

(4)The relief is given by reducing the profits of the trade of the later period by the unrelieved amount.

(5)But the company may make a claim for relief not to be given in the later period for the unrelieved amount or for any part of it specified in the claim.

(6)A claim under subsection (5) is effective if, and only if, it is made—

(a)within the period of two years after the end of the later period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(7)If the trade is a ring fence trade, this section has effect only in relation to so much of the loss mentioned in subsection (1)(a) as is not a non-decommissioning loss.

(8)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

(9)In this section—

  • “non-decommissioning loss” is to be interpreted in accordance with section 303A;

  • ring fence trade” has the same meaning as in Part 8 (see section 277).

(10)See also section 45A(9) (splitting for the purposes of that section and this section of losses that are partly, but not wholly, shock losses of insurance companies).

Textual Amendments

F73Ss. 45A-45H 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. 11

Modifications etc. (not altering text)

C14S. 45B(2) applied (with effect in accordance with Sch. 4 para. 190 of the amending Act) by 2009 c. 4, s. 1048(5B)-(4D) (as inserted) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 190

45CRe-application of section 45A if loss remains after previous applicationU.K.

(1)This section applies if—

(a)an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45A(4),

(b)any of that amount is not deducted from the company's total profits of the later period on a claim under section 45A(5) or surrendered by way of group relief for carried forward-losses under Part 5A,

(c)the company continues to carry on the trade in the accounting period (“the further period”) after the later period, and

(d)the conditions in subsection (2) are met.

(2)The conditions are that—

(a)the trade did not become small or negligible in the later period,

(b)relief under section 37 would not be unavailable by reason of section 44 for a loss (assuming there was one) made in the trade in the further period, and

(c)the further period is not an excluded accounting period of a general insurance company.

(3)Subsections (4) to (8) of section 45A apply as if—

(a)references to the unrelieved amount were to so much of the amount carried forward to the later period as is not deducted or surrendered as mentioned in subsection (1)(b), and

(b)references to the later period were to the further period.

(4)In this section “excluded accounting period” and “general insurance company” have the same meaning as in section 45A.

Textual Amendments

F73Ss. 45A-45H 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. 11

45DApplication of section 45B if loss remains after application of section 45AU.K.

(1)This section applies if—

(a)an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45A(4),

(b)any of that amount is not deducted from the company's total profits of the later period on a claim under section 45A(5) or surrendered by way of group relief for carried forward-losses under Part 5A,

(c)the company continues to carry on the trade in the accounting period (“the further period”) after the later period, and

(d)any of the conditions in section 45C(2) is not met.

(2)Subsections (2) to (8) of section 45B apply as if—

(a)references to the unrelieved amount were to so much of the amount carried forward to the later period as is not deducted or surrendered as mentioned in subsection (1)(b), and

(b)references to the later period were to the further period.

Textual Amendments

F73Ss. 45A-45H 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. 11

45ERe-application of section 45B if loss remains after previous applicationU.K.

(1)This section applies if—

(a)an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45B(2),

(b)any of that amount is not used under section 45B(4) to reduce profits of the trade for the later period, and

(c)the company continues to carry on the trade in the accounting period (“the further period”) after the later period.

(2)Subsections (2) to (8) of section 45B apply as if—

(a)references to the unrelieved amount were to so much of the amount carried forward to the later period as was not used as mentioned in subsection (1)(b), and

(b)references to the later period were to the further period.

Textual Amendments

F73Ss. 45A-45H 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. 11

45FTerminal losses: relief unrestricted by Part 7ZA and 7AU.K.

(1)This section applies if—

(a)a company makes a loss in a trade in an accounting period (the “loss-making period”),

(b)an amount of that loss is carried forward to an accounting period of the company (“the terminal period”) under section 45, 45A or 45B,

(c)relief in the terminal period is not given under section 45, 45A or (as the case may be) 45B for that amount or for any part of it, and

(d)the company ceases to carry on the trade in the terminal period.

(2)The company may make a claim for relief to be given for the unrelieved amount under this section.

(3)If the company makes a claim the relief is given by deducting the unrelieved amount from the relevant profits of the company of—

(a)the terminal period, and

(b)previous accounting periods so far as they fall (wholly or partly) within the period of 3 years ending with the end of the terminal period.

(4)But no deduction is to be made under subsection (3) for any accounting period which is—

(a)the loss-making period,

(b)a period before the loss-making period, or

(c)a period beginning before 1 April 2017.

(5)The amount of a deduction to be made under subsection (3) for any accounting period is the amount of the unrelieved amount so far as it cannot be deducted under that subsection for a subsequent accounting period.

(6)The company's claim must be made—

(a)within the period of two years after the end of the terminal period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(7)In this section—

  • the unrelieved amount” means so much of the amount mentioned in subsection (1)(b) for which relief is not given in the terminal period under section 45, 45A or (as the case may be) 45B, and

  • relevant profits”, in relation to the terminal period or any previous accounting period, means—

    (a)

    the total profits of the company of the period, in a case where the unrelieved amount was carried forward to the terminal period under section 45A,

    (b)

    the profits of the trade of the period, in a case where the unrelieved amount was carried forward to the terminal period under section 45 or 45B.

(8)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Textual Amendments

F73Ss. 45A-45H 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. 11

[F7445GSection 45F: accounting period falling partly within 3 year periodU.K.

(1)This section applies if—

(a)a company ceases to carry on a trade in an accounting period (“the terminal period”), and

(b)a previous accounting period of the company (“the straddling period”) falls partly within the period of 3 years ending with the end of the terminal period.

(2)The sum of any deductions under section 45F from the profits of the trade of the straddling period is not to exceed an amount equal to the overlapping proportion of those profits (calculated before making those deductions).

(3)The sum of—

(a)any deductions under section 45F from the profits of the trade of the straddling period, and

(b)any deductions under that section from the total profits of the straddling period in respect of losses made in the trade,

must not exceed an amount equal to the overlapping proportion of the total profits of the straddling period (calculated before making those deductions).

(4)The overlapping proportion is the same as the proportion that the part of the straddling period falling within the period of 3 years mentioned in subsection (1)(b) bears to the whole of the straddling period.]

Textual Amendments

F73Ss. 45A-45H 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. 11

F74S. 45G substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 21

45HSection 45F: transfers of trade to obtain reliefU.K.

Section 45F does not apply by reason of a company ceasing to carry on a trade if—

(a)on the company ceasing to carry on the trade, any of the activities of the trade begin to be carried on by a person who is not (or by persons any or all of whom are not) within the charge to corporation tax, and

(b)the company's ceasing to carry on the trade is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to secure that that section applies by reason of the cessation.]

Textual Amendments

F73Ss. 45A-45H 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. 11

46Use of trade-related interest and dividends if insufficient trade profitsU.K.

[F75(1)This section applies if in an accounting period a company carrying on a trade makes a loss in the trade and either—

(a)relief for the loss could be given in a later accounting period under section 45(4)(b) or 45B(4) but for the fact that there are no profits of the trade of the later accounting period, or

(b)the amount of relief for the loss that could be given in a later accounting period under section 45(4)(b) or 45B(4) is limited by reason of the amount of profits of the trade of the later accounting period.]

(2)[F76For the purposes of section 45 and 45B,] Treat any interest or dividends within subsection (3) as profits of the trade of the later period.

(3)Interest or dividends are within this subsection if they—

(a)are from investments, and

(b)would be brought into account as trading receipts in calculating the profits of the trade of the later period but for the fact that they have been subjected to tax under other provisions of the Tax Acts.

Textual Amendments

F75S. 46(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 148(2)

F76Words in s. 46(2) 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. 148(3)

47[F77Registered societies]U.K.

(1)This section applies for the purposes of [F78sections 45 and 45B] if the company carrying on the trade is a [F79registered society] .

(2)The following amounts may be brought into account in calculating the profits of the trade—

(a)amounts to which the charge to corporation tax on income applies under section 299 of CTA 2009 (charge to tax on non-trading profits from loan relationships), and

(b)amounts arising from possessions out of the United Kingdom to which the charge to corporation tax on income applies under section 933 of CTA 2009 (dividends of non-UK resident company) or under section 974 of that Act (income arising from foreign holdings).

Textual Amendments

F78Words in s. 47(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 149

Restrictions on relief: farming or market gardeningU.K.

48Farming or market gardeningU.K.

(1)This section applies if a loss is made in a trade of farming or market gardening in an accounting period (“the current period”).

(2)Relief under section 37 is not available for the loss if a loss, calculated without regard to capital allowances, was made in the trade—

(a)in the current period, and

(b)in each accounting period falling wholly or partly within the period of 5 years (“the prior 5 years”) ending immediately before the current period begins.

(3)But this section does not prevent relief for the loss from being available if—

(a)the carrying on of the trade forms part of, and is ancillary to, a larger trading undertaking,

(b)the farming or market gardening activities meet the reasonable expectation of profit test (see section 49), or

(c)the trade was started, or treated as started, during the prior 5 years (see section 50).

(4)A loss in a trade is calculated without regard to capital allowances by ignoring—

(a)the allowances treated as expenses of the trade under CAA 2001, and

(b)the charges treated as receipts of the trade under CAA 2001.

49Reasonable expectation of profitU.K.

(1)This section explains how the farming or market gardening activities (“the activities”) meet the reasonable expectation of profit test for the purposes of section 48(3)(b).

(2)The test is decided by reference to the expectations of a competent farmer or market gardener (a “competent person”) carrying on the activities.

(3)The test is met if—

(a)a competent person carrying on the activities in the year (“the current year”) after the prior 5 years would reasonably expect future profits (see subsection (4)), but

(b)a competent person carrying on the activities at the start of the prior period of loss (see subsection (5)) could not reasonably have expected the activities to become profitable until after the end of the current year.

(4)In determining whether a competent person carrying on the activities in the current year would reasonably expect future profits, regard must be had to—

(a)the nature of the whole of the activities, and

(b)the way in which the whole of the activities were carried on in the current year.

(5)The prior period of loss” means—

(a)the prior 5 years, or

(b)if subsection (6) applies, the period made up of the successive accounting periods taken together as mentioned in that subsection.

(6)This subsection applies if—

(a)losses in the trade, calculated without regard to capital allowances (see section 48(4)), were made in successive accounting periods before the current year, and

(b)taken together those accounting periods amount to a period of more than 5 years ending at the end of the prior 5 years.

50Cessation of tradesU.K.

(1)For the purposes of section 48(3)(c) a trade is to be treated as ceased, and a new trade as started, in any of the following cases—

  • Case 1

    A company starts or ceases to be within the charge to corporation tax in respect of a trade.

  • Case 2

    There is a change in the persons carrying on a trade which involves all of the persons carrying it on before the change permanently ceasing to carry it on.

  • Case 3

    There is a change in the persons carrying on a trade and—

    (a)

    immediately before the change, the trade is carried on by persons who include a company, and

    (b)

    after the change, no company that carried on the trade in partnership immediately before the change continues to carry it on in partnership.

  • Case 4

    There is a change in the persons carrying on a trade and—

    (a)

    immediately before the change, no company carries on the trade in partnership, and

    (b)

    immediately after the change, the trade is carried on in partnership by persons who include a company.

(2)Subsection (1) is subject to subsections (3) and (4).

(3)A trade is not to be treated as ceased if the change in the persons carrying on the trade is a transfer to which Chapter 1 of Part 22 applies (transfers of trade without a change of ownership).

(4)In determining if there is a change in the persons carrying on a trade, subsection (1) is subject to the following rules—

  • Rule 1

    A husband and wife are treated as the same person.

  • Rule 2

    Individuals who are civil partners of each other are treated as the same person.

  • Rule 3

    A husband or wife is treated as the same person as—

    (a)

    a company of which either of them has control, or

    (b)

    a company of which both have control.

  • Rule 4

    An individual's civil partner is treated as the same person as—

    (a)

    a company of which either of the civil partners has control, or

    (b)

    a company of which both have control.

(5)In subsection (4) “control” has the same meaning as in section 450.

51Companies treated as same person as individualU.K.

(1)This section applies for the purposes of sections 48(2) and 49(6) if, as a result of section 50(4), a company is treated as the same person as an individual.

(2)A loss in an accounting period may be determined by reference to profits and losses made by the individual in the trade in tax years (within the meaning of the Income Tax Acts).

(3)For this purpose—

(a)profits and losses made by the individual in tax years may be allocated (in whole or in part) to accounting periods in a way that is just and reasonable, and

(b)if a tax year or part of a tax year is not covered by any accounting period—

(i)the period covered by the tax year or part may be treated as if it were an accounting period, and

(ii)in accordance with paragraph (a), profits and losses may be allocated to it.

(4)Section 70(2), (3)(a), (4)(a) and (5) of ITA 2007 applies for the purpose of determining the individual's profits and losses in the trade for tax years.

Restrictions on relief: commodity futuresU.K.

52Dealings in commodity futuresU.K.

(1)This section applies if—

(a)a company makes a loss in a trade of dealing in commodity futures,

(b)the company carried on the trade as a partner in a partnership, and

(c)a scheme has been effected or arrangements within subsection (3) have been made (whether by the partnership agreement or otherwise).

(2)Relief under section 37 is not available for the loss.

(3)Arrangements are within this subsection if as a result of them the sole or main benefit that might be expected to arise to the company from the company's interest in the partnership is the obtaining of a reduction in tax liability by means of relief under section 37.

(4)If relief is given in a case to which this section applies, the relief is withdrawn by the making of an assessment to corporation tax under this section.

(5)Commodity futures” means commodity futures that are for the time being dealt in on a recognised futures exchange (as defined in section 288(6) of TCGA 1992).

Other restrictions on reliefU.K.

53Leasing contracts and company reconstructionsU.K.

(1)This section applies if—

(a)under a contract a company (“the leasing company”) incurs capital expenditure on the provision of plant or machinery,

(b)the leasing company lets that plant or machinery to another person under another contract (“the leasing contract”),

(c)a first-year allowance (within the meaning of Part 2 of CAA 2001) in relation to the capital expenditure is made to the leasing company for an accounting period (“the allowance period”),

(d)arrangements within subsection (3) are in place in the allowance period, and

(e)apart from this section, relief under section 37 [F80, 45, 45A or 45B] would be available to the leasing company in relation to losses made on the leasing contract.

(2)In the allowance period and any subsequent accounting period, no relief is available to the leasing company as mentioned in subsection (1)(e) except against profits (if any) arising under the leasing contract.

(3)Arrangements are within this subsection if, as a result of them, a successor company will be able to carry on, at some time during or after the allowance period, any part of the leasing company's trade which includes the performance of all or any of the obligations which (apart from the arrangements) would be the leasing company's obligations under the leasing contract.

(4)A company (“company S”) is a successor company if—

(a)Chapter 1 of Part 22 applies in relation to the leasing company and company S as, respectively, the predecessor and the successor within the meaning of that Chapter, or

(b)the leasing company and company S are connected with each other.

(5)Arrangements” means arrangements of any kind (whether or not in writing).

(6)For the purposes of this section, calculate losses made on the leasing contract and profits arising under that contract as if—

(a)the performance of that contract were a trade carried on by the leasing company separately from any other trade carried on by it, and

(b)the leasing company started carrying on that separate trade at the commencement of the letting under that contract.

(7)In determining if relief is available to the leasing company as mentioned in subsection (1)(e), any losses made on the leasing contract are treated as made in a trade carried on by the leasing company separately from any other trade carried on by it.

Textual Amendments

F80Words in s. 53(1)(e) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 150

54Non-UK resident company: receipts of interest, dividends or royaltiesU.K.

(1)This section applies if—

(a)a non-UK resident company carries on a trade in the United Kingdom, and

(b)tax-exempt receipts of interest, dividends or royalties arise to the company.

(2)The receipts are not to be excluded from the profits of the trade so as to give rise to a loss to be deducted under [F81section 37 [F82, 45, 45A or 45B]] .

(3)For the purposes of subsection (1) a receipt is “tax-exempt” if it has been treated as tax-exempt under arrangements having effect under section 2 of TIOPA 2010.

Textual Amendments

F81Words in s. 54(2) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 217

F82Words in s. 54(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 151

Chapter 3U.K.Limited partners and members of limited liability partnerships

IntroductionU.K.

55Introduction to ChapterU.K.

(1)This Chapter restricts the amount of relief that may be given for any loss made by a company in a trade carried on by the company—

(a)as a limited partner (see sections 56 to 58), or

(b)as a member of a limited liability partnership (an “LLP”) (see sections 59 to 61).

(2)In this Chapter persons carrying on a trade in partnership are referred to collectively as a “firm”.

Limited partnersU.K.

56Restriction on reliefs for limited partnersU.K.

(1)This section applies if—

(a)at any time in an accounting period a company carries on a trade (“the limited partnership trade”) as a limited partner in a firm, and

(b)the company makes a loss in the limited partnership trade in that period (“the loss-making period”).

(2)There is a restriction on the amount of relief that may be given for the loss—

(a)under section 37 [F83or 45A] (relief for trade losses against total profits) other than against profits of the limited partnership trade, F84...

(b)under Part 5 (group relief)[F85, or

(c)under Part 5A (group relief for carried-forward losses)]

(3)The restriction is that the sum of—

(a)the amount of the relief given, and

(b)the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the firm as at the time mentioned in subsection (5).

(4)Relief is within this subsection if it is given under section 37 [F86or 45A] or Part 5 [F87or 5A] for a loss made in the limited partnership trade by the company in an accounting period at any time during which it carries on that trade as a limited partner.

(5)The time referred to in subsection (3) is—

(a)the end of the loss-making period, or

(b)if the company ceases to carry on the limited partnership trade during that period, the time when it does so.

(6)If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the limited partnership trade and then add the results together.

Textual Amendments

F83Words in s. 56(2)(a) 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. 152(2)(a)

F84Word in s. 56(2)(a) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(2)(b)

F85S. 56(2)(c) and word 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. 152(2)(c)

F86Words in s. 56(4) 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. 152(3)(a)

F87Words in s. 56(4) 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. 152(3)(b)

57Meaning of “contribution to the firm”U.K.

(1)For the purposes of section 56 the company's contribution to the firm is the sum of amounts A and B.

(2)Amount A is the amount which the company has contributed to the firm as capital less so much of that amount (if any) as is within subsection (4).

(3)In particular, the company's share of any profits of the firm is to be included in the amount which the company has contributed to the firm as capital so far as that share has been added to the firm's capital.

(4)An amount of capital is within this subsection if it is an amount which the company—

(a)has previously drawn out or received back,

(b)is or may be entitled to draw out or receive back at any time when the company is carrying on a trade as a limited partner in the firm, or

(c)is or may be entitled to require another person to reimburse to it.

(5)In subsection (4) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to tax as profits of a trade.

(6)Amount B is the amount of the company's total share of profits within subsection (7) except so far as—

(a)that share has been added to the firm's capital, or

(b)the company has received that share in money or money's worth.

(7)Profits are within this subsection if they are from the limited partnership trade.

(8)In determining the amount of the company's total share of profits within subsection (7) ignore the company's share of any losses from the limited partnership trade which would (apart from this subsection) reduce that amount.

(9)In subsections (3), (7) and (8) any reference to profits or losses are to profits or losses calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits or losses for tax purposes).

(10)If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, subsections (7) and (8) have effect as if references to the limited partnership trade were references to the limited partnership trade or any of the other trades.

58Meaning of “limited partner”U.K.

(1)In sections 56 and 57 “limited partner” means a company which carries on a trade—

(a)as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907,

(b)as a partner in a firm which in substance acts as a limited partner in relation to the trade (see subsection (2)), or

(c)while the condition mentioned in subsection (3) is met in relation to the company.

(2)A company in substance acts as a limited partner in relation to a trade if the company—

(a)is not entitled to take part in the management of the trade, and

(b)is entitled to have any liabilities (or those beyond a certain limit) for debts or obligations incurred for the purposes of the trade met or reimbursed by some other person.

(3)The condition referred to in subsection (1)(c) is that—

(a)the company carries on the trade jointly with other persons,

(b)under the law of a territory outside the United Kingdom, the company is not entitled to take part in the management of the trade, and

(c)under that law, the company is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade.

(4)In the case of a company which is a limited partner as a result of subsection (1)(c), references in sections 56 and 57 to the firm are to be read as references to the relationship between the company and the other persons mentioned in subsection (3)(a).

Members of LLPsU.K.

59Restriction on relief for members of LLPsU.K.

(1)This section applies if—

(a)a company carries on a trade (“the LLP trade”) as a member of an LLP at any time in an accounting period, and

(b)the company makes a loss in the LLP trade in that period (“the loss-making period”).

(2)There is a restriction on the amount of relief that may be given for the loss—

(a)under section 37 [F88or 45A] (relief for trade losses against total profits) other than against profits of the LLP trade, F89...

(b)under Part 5 (group relief)[F90, or

(c)under Part 5A (group relief for carried-forward losses)]

(3)The restriction is that the sum of—

(a)the amount of the relief given, and

(b)the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the LLP as at the time mentioned in subsection (5).

(4)Relief is within this subsection if it is given under section 37 [F91or 45A] or Part 5 [F92or 5A] for a loss made in the LLP trade by the company in an accounting period at any time during which it carries on that trade as a member of an LLP.

(5)The time mentioned in subsection (3) is—

(a)the end of the loss-making period, or

(b)if the company ceases to carry on the LLP trade during that period, at the time when it does so.

(6)If the LLP is carrying on, or has carried on, other trades apart from the LLP trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the LLP trade and then add the results together.

Textual Amendments

F88Words in s. 59(2)(a) 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. 153(2)(a)

F89Word in s. 59(2)(a) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 153(2)(b)

F90S. 59(2)(c) and word 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. 153(2)(c)

F91Words in s. 59(4) 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. 153(3)(a)

F92Words in s. 59(4) 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. 153(3)(b)

60Meaning of “contribution to the LLP”U.K.

(1)For the purposes of section 59 the company's contribution to the LLP at any time (“the relevant time”) is the sum of amounts A and B.

(2)Amount A is the amount which the company has contributed to the LLP as capital less so much of that amount (if any) as is within subsection (5).

(3)In particular, the company's share of any profits of the LLP is to be included in the amount which the company has contributed to the LLP as capital so far as that share has been added to the LLP's capital.

(4)In subsection (3) the reference to profits is to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for tax purposes).

(5)An amount of capital is within this subsection if it is an amount which the company—

(a)has previously drawn out or received back,

(b)draws out or receives back during the period of 5 years beginning with the relevant time,

(c)is or may be entitled to draw out or receive back at any time when it is a member of the LLP, or

(d)is or may be entitled to require another person to reimburse to it.

(6)In subsection (5) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to tax as profits of a trade.

(7)Amount B is the amount of the company's liability on a winding up of the LLP so far as that amount is not included in amount A.

(8)For the purposes of subsection (7) the amount of the company's liability on a winding up of the LLP is the amount which—

(a)the company is liable to contribute to the assets of the LLP in the event of the LLP being wound up, and

(b)the company remains liable to contribute for the period of at least 5 years beginning with the relevant time (or until the LLP is wound up, if that happens before the end of that period).

61Unrelieved losses brought forwardU.K.

(1)[F93Subsection (2)] applies if—

(a)a company (“the member company”) carries on a trade as a member of an LLP at a time during an accounting period (“the current period”), and

(b)as a result of section 59, relief under section 37 or Part 5 (group relief) has not been given for an amount of loss made in the trade by the member company as a member of the LLP in a previous accounting period.

(2)For the purpose of determining the relief under section 37 or Part 5 to be given to any company, the amount of loss is treated as having been made by the member company in the current period so far as it is not excluded by subsection (3) or (4).

[F94(2A)Subsection (2B) applies if—

(a)a company (“the member company”) carries on a trade as a member of an LLP at a time during an accounting period (“the current period”), and

(b)as a result of section 59, relief under section 45A or Part 5A (group relief for carried forward losses) has not been given for an amount of loss made in the trade by the member company as a member of the LLP in a previous accounting period.

(2B)For the purposes of determining the relief under section 45A or Part 5A to be given to any company, the amount of loss is treated as having been made by the member company in the current period so far as it is not excluded by subsection (3) or (4).]

(3)An amount of loss is excluded so far as—

(a)under this section the amount has been treated as made by the member company in a previous accounting period, and

(b)as a result of that, relief under section 37 [F95or 45A] or Part 5 [F96or Part 5A] has been given for the amount or would have been given had a claim been made.

(4)An amount of loss is also excluded so far as relief under the Corporation Tax Acts has been given for the amount other than as a result of this section.

Textual Amendments

F93Words in s. 61(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 154(2)

F94S. 61(2A)(2B) 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. 154(3)

F95Words in s. 61(3) 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. 154(4)(a)

F96Words in s. 61(3) 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. 154(4)(b)

Chapter 4U.K.Property losses

Modifications etc. (not altering text)

C15Pt. 4 Ch. 4 excluded (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 87(2)(3) (with s. 147, Sch. 17)

UK property businessesU.K.

62Relief for losses made in UK property businessU.K.

(1)This section applies if, in an accounting period, a company carrying on a UK property business makes a loss in the business.

(2)Relief for the loss is given to the company under this section.

(3)The relief is given by deducting the loss from the company's total profits of the accounting period.

(4)[F97Subsections (5) to (5C) apply] if—

[F98(a)an amount of the loss is not deducted as mentioned in subsection (3) or surrendered by way of group relief under Part 5,]

(b)the company continues to carry on the UK property business in the next accounting period.

(5)[F99The amount]

(a)is carried forward to the next accounting period, and

(b)is treated for the purposes of this section as a loss made by the company in the UK property business in that period.

[F100(5A)But relief under subsection (2) for the amount is given to the company in the next accounting period only on the making by the company of a claim.

(5B)A claim may relate to the whole of the amount or to part of it only.

(5C)A claim must be made—

(a)within the period of two years after the end of the next accounting period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(5D)In the application of this section to an amount of a loss previously carried forward under subsection (5), the reference in subsection (4)(a) to group relief under Part 5 is to be read as a reference to group relief for carried-forward losses under Part 5A.]

(6)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Textual Amendments

F97Words in s. 62(4) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 13(2)(a)

F98S. 62(4)(a) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 13(2)(b)

F99Words in s. 62(5) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 13(3)

F100S. 62(5A)-(5D) 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. 13(4)

Modifications etc. (not altering text)

C16S. 62 excluded (with effect in accordance with Sch. 18 para. 63 of the amending Act) by Finance Act 2016 (c. 24), Sch. 18 para. 20(14)

63Company with investment business ceasing to carry on UK property businessU.K.

(1)This section applies if, in an accounting period, a company with investment business (as defined in [F101section 1218B] of CTA 2009)—

(a)ceases to carry on a UK property business or to be within the charge to corporation tax in respect of such a business, but

(b)continues to be a company with investment business.

[F102(2)Subsections (3) to (7) apply if an amount of loss made in carrying on the UK property business would be carried forward to the next accounting period under section 62(5) but for the company ceasing to carry on the business or to be within the charge to corporation tax in respect of it.]

(3)The amount of loss—

(a)is, nevertheless, carried forward to the next accounting period, and

(b)is treated for the purposes of Chapter 2 of Part 16 of CTA 2009 as an expense of management deductible for [F103the next accounting] period or a succeeding period in accordance with that Chapter.

[F104(4)But a deduction in respect of the amount of loss may be made under section 1219 of CTA 2009 for the next accounting period only on the making by the company of a claim.

(5)A claim may relate to the whole of the amount of the loss or to part of it only.

(6)A claim must be made—

(a)within the period of two years after the end of the next accounting period, or

(b)within such further period as an officer of Revenue and Customs may allow.

(7)Subsection (1A) of section 1219 of CTA 2009 does not apply in relation to a deduction in respect of the amount of loss made for the next accounting period.]

Textual Amendments

F101Words in s. 63(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), s. 55(b)

F102S. 63(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 14(2)

F103Words in s. 63(3)(b) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 14(3)

F104S. 63(4)-(7) 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. 14(4)

64UK property business to be commercial or carried on for statutory functionsU.K.

(1)Sections 62 and 63 apply to a UK property business only so far as it is carried on—

(a)on a commercial basis, or

(b)in the exercise of functions conferred by or under an Act (including an Act of the Scottish Parliament).

(2)A business (or part) is not carried on on a commercial basis unless it is carried on with a view to making a profit or so as to afford a reasonable expectation of making a profit.

(3)If during an accounting period there is a change in the way in which a business (or part) is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

65UK furnished holiday lettings business treated as tradeU.K.

(1)This section applies if a company carries on a UK furnished holiday lettings business.

(2)UK furnished holiday lettings business” means a UK property business so far as it consists of the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6 of Part 4 of CTA 2009).

(3)For the purposes of this Part [F105 (but as modified below)] the company is treated as carrying on a single trade—

(a)which consists of every commercial letting of furnished holiday accommodation comprised in the company's UK furnished holiday lettings business, and

(b)in relation to which the profits are chargeable to corporation tax under Chapter 2 of Part 3 of CTA 2009.

(4)F106... sections 62 to 64 apply in relation to the company's UK property business as if the lettings mentioned in subsection (3)(a) were not included in it.

[F107(4A)Chapter 2 applies as if the following were omitted—

(a)sections 37 to 44,

(b)the words “beginning before 1 April 2017” in section 45(1),

(c)sections 45A to 45H, and

(d)sections 48 to 54.

(4B)Any deduction made under section 45(4)(b) from the profits of the trade treated as carried on under this section is to be ignored for the purposes of section 269ZB (restriction on deductions from trading profits).]

(5)If there is a letting of accommodation only part of which is furnished holiday accommodation, just and reasonable apportionments are to be made for the purpose of determining what is comprised in the trade treated as carried on.

Textual Amendments

F105Words in s. 65(3) inserted (with effect in accordance with Sch. 14 para. 9 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 8(2)(a)

F106Word in s. 65(4) omitted (with effect in accordance with Sch. 14 para. 9 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 14 para. 8(2)(b)

F107S. 65(4A)(4B) substituted for s. 65(4A) (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 155(2)

Overseas property businessesU.K.

66Relief for losses made in overseas property businessU.K.

(1)This section applies if, in an accounting period, a company carrying on an overseas property business makes a loss in the business.

(2)Relief for the loss is given to the company under this section.

(3)For this purpose—

(a)the loss is carried forward to subsequent accounting periods, and

(b)the profits of the business of any such period are reduced by the loss so far as it cannot be used under this paragraph to reduce the profits of the business of an earlier period.

(4)Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

67Overseas property business to be commercial or carried on for statutory functionsU.K.

(1)Section 66 applies to an overseas property business only so far as it is carried on—

(a)on a commercial basis, or

(b)in the exercise of functions conferred by or under an Act (including an Act of the Scottish Parliament) or by or under the law of a territory outside the United Kingdom.

(2)A business (or part) is not carried on on a commercial basis unless it is carried on with a view to making a profit or so as to afford a reasonable expectation of making a profit.

(3)If during an accounting period there is a change in the way in which a business (or part) is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

[F10867A EEA furnished holiday lettings business treated as tradeU.K.

(1) This section applies if a company carries on an EEA furnished holiday lettings business.

(2) EEA furnished holiday lettings business ” means an overseas property business so far as it consists of the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6 of Part 4 of CTA 2009) in one or more EEA states.

(3)For the purposes of this Part (but as modified below) the company is treated as carrying on a single trade—

(a) which consists of every commercial letting of furnished holiday accommodation comprised in the company's EEA furnished holiday lettings business, and

(b)in relation to which the profits of which are chargeable to corporation tax under Chapter 2 of Part 3 of CTA 2009.

(4)Sections 66 and 67 apply in relation to the company's overseas property business as if the lettings mentioned in subsection (3)(a) were not included in it.

[F109(5)Chapter 2 applies as if the following were omitted—

(a)sections 37 to 44,

(b)the words “beginning before 1 April 2017” in section 45(1),

(c)sections 45A to 45H, and

(d)sections 48 to 54.

(5A)Any deduction made under section 45(4)(b) from the profits of the trade treated as carried on under this section is to be ignored for the purposes of section 269ZB (restriction on deductions from trading profits).]

(6)If there is a letting of accommodation only part of which is furnished holiday accommodation, just and reasonable apportionments are to be made for the purpose of determining what is comprised in the trade treated as carried on.]

Textual Amendments

F108S. 67A inserted (with effect in accordance with Sch. 14 para. 9 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 8(3)

F109S. 67A(5)(5A) substituted for s. 67A(5) (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 155(3)

Modifications etc. (not altering text)

C17S. 67A applied by 2001 c. 2, s. 250A(2) (as inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(14))

[F110Insurance companiesU.K.

Textual Amendments

F110 67B and cross-heading inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 218

67BExclusion in the case of property businesses of insurance companiesU.K.

(1)This Chapter does not apply for the purpose of applying the I - E rules in relation to a loss made by an insurance company in any of its separate UK property businesses or overseas property businesses within section 86(4) of FA 2012.

(2)But in the case of a loss which is referable, in accordance with Chapter 4 of Part 2 of that Act, to the company's basic life assurance and general annuity business, see section 87(3) and (4) of that Act.]

Chapter 5U.K.Losses on disposal of shares

Share loss relief against incomeU.K.

68Share loss reliefU.K.

(1)A company which has subscribed for shares in a qualifying trading company is eligible for relief under this Chapter (“share loss relief”) if—

(a)it incurs an allowable loss (for the purposes of corporation tax on chargeable gains) on the disposal of the shares in any accounting period, and

(b)it meets the eligibility conditions (see section 69).

(2)Subsection (1) applies only if the disposal of the shares is—

(a)by way of a bargain made at arm's length,

(b)by way of a distribution in the course of dissolving or winding up the qualifying trading company,

(c)a disposal within section 24(1) of TCGA 1992 (entire loss, destruction, dissipation or extinction of asset), or

(d)a deemed disposal under section 24(2) of that Act (claim that value of the asset has become negligible).

(3)Subsection (1) does not apply to any allowable loss incurred on the disposal if—

(a)the shares are the subject of an exchange or arrangement of the kind mentioned in section 135 or 136 of TCGA 1992 (company reconstructions etc), and

(b)because of section 137 of that Act, the exchange or arrangement involves a disposal of the shares.

(4)For the meaning of “qualifying trading company”, see section 78.

69Eligibility conditionsU.K.

(1)These are the eligibility conditions mentioned in section 68(1)(b) that a company which has subscribed for shares in a qualifying trading company must meet to be eligible for share loss relief on the disposal of the shares.

(2)Condition A is that the subscribing company (“the investor”) is an investment company on the date of the disposal of the shares (“the disposal date”).

(3)Condition B is that the investor has been an investment company—

(a)for a continuous period of 6 years ending on the disposal date, or

(b)for a shorter continuous period ending on the disposal date and has not before the beginning of that period been a trading company or an excluded company (see section 90(1)).

(4)Condition C is that the investor was not associated with, or a member of the same group as, the qualifying trading company at any time during the period—

(a)beginning with the date when the investor subscribed for the shares, and

(b)ending with the disposal date.

(5)For the purposes of condition C, two companies are associated with each other if—

(a)one controls the other, or

(b)both are under the control of the same person or persons.

(6)Sections 450 and 451 (which contain provision as to when a person is to be taken to have control of a company) apply for the purposes of subsection (5).

70Entitlement to claimU.K.

(1)This section applies where a company is eligible for share loss relief.

(2)The company may make a claim for the loss to be deducted in calculating for corporation tax purposes the company's income—

(a)for the accounting period in which the loss is incurred, and

(b)if the claim so requires, for previous accounting periods so far as they fall (wholly or partly) within the period of 12 months ending immediately before the beginning of the accounting period in which the loss is incurred.

(3)The company may make a claim under subsection (2)(b) for any accounting period only if the company was an investment company throughout that period.

(4)A claim for share loss relief must be made before the end of the period of two years after the end of the accounting period in which the loss is incurred.

71How relief worksU.K.

(1)This subsection explains how deductions in respect of share loss relief claimed by a company under section 70 are to be made.

  • Step 1

    Deduct the loss in calculating the company's income for the accounting period in which the loss is incurred.

  • Step 2

    If not all of the loss can be deducted at Step 1, deduct the remaining loss in calculating the company's income for any accounting period falling (wholly or partly) within the 12 month period that ends immediately before the beginning of the accounting period in which the loss is incurred.

(2)The amount of a deduction to be made at Step 2 for any accounting period is the amount of the loss so far as it cannot be deducted under subsection (1) for a subsequent accounting period.

(3)Subsection (1) is subject to sections 72, 74(5) and 75 (which set limits on the amount of share loss relief that may be obtained in particular cases).

(4)A deduction at Step 2 from the income of an accounting period may be made only after all other deductions have been made from the income for that period in respect of share loss relief given for an earlier loss.

(5)Deductions made on the basis of relief claimed under Part 7 of Schedule 15 to FA 2000 (relief for losses on disposal of shares to which investment relief is attributable) must, in accordance with paragraph 70 of that Schedule, be made before making deductions for share loss relief.

(6)A claim for share loss relief does not affect any claim for a deduction under TCGA 1992 for so much of the allowable loss as is not deducted under subsection (1).

72Limit on deduction if accounting period falls partly within 12 month periodU.K.

(1)This section applies if an accounting period falls partly within the period of 12 months ending immediately before the beginning of the accounting period in which the loss is incurred.

(2)The amount of the deduction under Step 2 in section 71(1) for the accounting period is not to exceed an amount equal to the overlapping proportion of the company's income of that period.

(3)The overlapping proportion is the same as the proportion that the part of the accounting period falling within the 12 month period mentioned in subsection (1) bears to the whole of the accounting period.

Shares: subscription and disposalU.K.

73Subscription for sharesU.K.

(1)This section has effect for the purposes of this Chapter.

(2)A company subscribes for shares in another company if they are issued to the company by the other company in consideration of money or money's worth.

(3)If—

(a)a company has subscribed for, or is treated under this subsection as having subscribed for, any shares, and

(b)any corresponding bonus shares are subsequently issued to the company,

the company is treated as having subscribed for the bonus shares.

(4)If—

(a)a company subscribed for any shares (“the original shares”) on a particular date, and

(b)any corresponding bonus shares are treated as having been subscribed for by the company under subsection (3),

the company is treated as having subscribed for the bonus shares on that date.

74Disposals of new sharesU.K.

(1)This section applies if—

(a)a company disposes of shares (“the new shares”), and

(b)the new shares are, by virtue of section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal), identified with other shares (“the old shares”) previously held by the company.

(2)The company is not eligible for share loss relief on the disposal of the new shares unless condition A or B is met.

This is subject to section 87(3).

(3)Condition A is that the company would have been eligible for share loss relief on a disposal of the old shares—

(a)if the company had incurred an allowable loss in disposing of them by way of a bargain made at arm's length on the occasion of the disposal that would have occurred but for section 127 of TCGA 1992, and

(b)where applicable, if this Chapter had then been in force.

(4)Condition B is that the company gave for the new shares consideration in money or money's worth other than consideration of the kind mentioned in paragraph (a) or (b) of section 128(2) of TCGA 1992 (“new consideration”).

(5)If the company relies on condition B, the amount of share loss relief on the disposal of the new shares must not exceed the amount or value of the new consideration taken into account as a deduction in calculating the amount of the loss incurred on the disposal.

75Limits on reliefU.K.

(1)Subsection (2) applies if—

(a)a company disposes of any shares for which it has subscribed in a qualifying trading company (“qualifying shares”),

(b)those shares either—

(i)form part of a section 104 holding or a 1982 holding at the time of the disposal, or

(ii)formed part of such a holding at an earlier time, and

(c)the company makes a claim under section 70 in respect of a loss incurred on the disposal.

(2)The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares had not formed part of the holding.

(3)Subsection (4) applies if—

(a)a company disposes of any qualifying shares,

(b)the qualifying shares, and other shares that are not capable of being qualifying shares, are for the purposes of TCGA 1992 to be treated as acquired by a single transaction by virtue of section 105(1)(a) of that Act (disposal of shares acquired on same day etc), and

(c)the company makes a claim under section 70 in respect of a loss incurred on the disposal.

(4)The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if—

(a)the qualifying shares were to be treated as acquired by a single transaction, and

(b)the other shares were not to be so treated.

(5)Subsection (6) applies if—

(a)a company (“the investor”) disposes of any qualifying shares,

(b)the qualifying shares (taken as a single asset), and other shares in the same company that are not capable of being qualifying shares (taken as a single asset), are for the purposes of TCGA 1992 to be treated as the same asset by virtue of section 127 of that Act (reorganisation etc treated as not involving disposal), and

(c)the investor makes a claim under section 70 in respect of a loss incurred on the disposal.

References in this subsection and subsection (6) to other shares in the same company include debentures of the same company.

(6)The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares and the other shares in the same company were not to be treated as the same asset.

(7)In this section—

  • section 104 holding” has the meaning given by section 104(3) of TCGA 1992, and

  • 1982 holding” has the meaning given by section 109(1) of that Act.

(8)For the purposes of this section and section 76, shares are not capable of being qualifying shares at any time if—

(a)the company concerned acquired the shares otherwise than by subscription, [F111or]

(b)condition C in section 78(4) was not met in relation to the issue of the shares, F112...

F112(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)For the purposes of subsection (5), shares are not capable of being qualifying shares at any time if they are shares of a different class from the shares mentioned in paragraph (a) of that subsection.

Textual Amendments

F111Word in s. 75(8)(a) inserted (with effect in accordance with s. 38(3) of the amending Act) by Finance Act 2020 (c. 14), s. 38(2)(b)(i)

F112S. 75(8)(c) and word omitted (with effect in accordance with s. 38(3) of the amending Act) by virtue of Finance Act 2020 (c. 14), s. 38(2)(b)(i)

76Disposal of shares forming part of mixed holdingU.K.

(1)This section applies if a company disposes of shares forming part of a mixed holding of shares, that is, a holding of shares in a company which includes—

(a)shares that are not capable of being qualifying shares, and

(b)other shares.

(2)Any question—

(a)whether a disposal by the company of shares forming part of the mixed holding is of qualifying shares, or

(b)as to which of any qualifying shares acquired by the company at different times such a disposal relates to,

is to be determined as provided by the following provisions of this section.

(3)Any such question as is mentioned in subsection (2) is to be determined—

(a)except in a case falling within paragraph (b)—

(i)in accordance with subsection (4), and

(ii)in the case of shares which under that subsection are identified with the whole or any part of a section 104 holding or a 1982 holding, in accordance with subsection (5),

(b)in the case of a mixed holding which includes any shares—

(i)to which investment relief is attributable under Schedule 15 to FA 2000 (corporate venturing scheme), and

(ii)which have been held continuously (within the meaning of paragraph 97 of that Schedule) from the time they were issued until the disposal,

in accordance with subsection (6).

(4)For the purposes of subsection (3)(a)(i), the question is to be determined by identifying the shares disposed of in accordance with sections 105 and 107 of TCGA 1992.

(5)For the purposes of subsection (3)(a)(ii), the question is to be determined by treating the disposal and any previous disposal by the company out of the section 104 or 1982 holding as relating to shares acquired later rather than earlier.

(6)For the purposes of subsection (3)(b), the question is to be determined—

(a)as provided by paragraph 93 of Schedule 15 to FA 2000 (identification of shares on a disposal of part of a holding where investment relief is attributable to any shares in the holding held continuously by the disposing company), but

(b)as if the references in that paragraph to a disposal had the same meaning as in the preceding provisions of this section.

(7)Any such question as is mentioned in subsection (2) which cannot be determined as provided by subsections (3) to (6) is to be determined on a just and reasonable basis.

(8)In this section “holding” means any number of shares of the same class held by one company in the same capacity, growing or diminishing as shares of that class are acquired or disposed of.

For this purpose shares are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt in on such an exchange.

(9)In this section “section 104 holding”, “1982 holding” and “qualifying shares” have the same meaning as in section 75.

77Section 76: supplementaryU.K.

(1)In a case to which section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal) applies (including a case where that section applies by virtue of an enactment relating to chargeable gains), shares included in the new holding are treated for the purposes of section 76 as acquired when the original shares were acquired.

(2)Any shares held or disposed of by a nominee or bare trustee for a company are treated for the purposes of section 76 as held or disposed of by that company.

(3)In this section “new holding” and “original shares” have the same meaning as in section 127 of TCGA 1992 (or, as the case may be, that section as applied by the enactment concerned).

Qualifying trading companies: the requirementsU.K.

78Qualifying trading companiesU.K.

(1)For the purposes of this Chapter a qualifying trading company is a company which meets each of conditions A to [F113C] .

(2)Condition A is that the company either—

(a)meets each of the following requirements on the date of the disposal—

(i)the trading requirement (see section 79),

(ii)the control and independence requirement (see section 81),

(iii)the qualifying subsidiaries requirement (see section 82), and

(iv)the property managing subsidiaries requirement (see section 83), or

(b)has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company.

(3)Condition B is that the company either—

(a)has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or

(b)has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company.

(4)Condition C is that the company—

(a)met the gross assets requirement (see section 84) both immediately before and immediately after the issue of the shares in respect of which the share loss relief is claimed, and

(b)met the unquoted status requirement (see section 85) at the relevant time within the meaning of that section.

F114(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F113Word in s. 78(1) substituted (with effect in accordance with s. 38(3) of the amending Act) by Finance Act 2020 (c. 14), s. 38(2)(b)(ii)

F114S. 78(5) repealed (with effect in accordance with s. 38(3) of the amending Act) by Finance Act 2020 (c. 14), s. 38(1)(b)

79The trading requirementU.K.

(1)The trading requirement is that—

(a)the company, ignoring any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or

(b)the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.

(2)If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—

(a)the company is treated as a parent company for the purposes of subsection (1)(b), and

(b)the reference in subsection (1)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.

This subsection does not apply at any time after the abandonment of that intention.

(3)For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.

(4)For the purpose of determining the business of a group, activities are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.

(5)For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—

(a)the holding of shares in or securities of a qualifying subsidiary of the parent company,

(b)the making of loans to another group company,

(c)the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or

(d)the holding and managing of property used by a group company for the purpose of research and development from which it is intended—

(i)that a qualifying trade to be carried on by a group company will be derived, or

(ii)that a qualifying trade carried on or to be carried on by a group company will benefit.

(6)Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.

(7)In this section—

  • excluded activities” has the meaning given by section 192 of ITA 2007 read with sections 193 to 199 of that Act,

  • group” means a parent company and its qualifying subsidiaries,

  • group company”, in relation to a group, means the parent company or any of its qualifying subsidiaries,

  • incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question,

  • mainly trading subsidiary” means a subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,

  • non-qualifying activities” means—

    (a)

    excluded activities, and

    (b)

    activities (other than research and development) carried on otherwise than in the course of a trade,

  • parent company” means a company that has one or more qualifying subsidiaries,

  • qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007,

  • qualifying trade” has the meaning given by section 189 of that Act, and

  • research and development” has the meaning given by section 1138 of this Act.

(8)In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by subsection (7) for the purposes of the definitions of “excluded activities” and “qualifying trade”) “period B” means the continuous period that is relevant for the purposes of section 78(3).

(9)In section 195 of ITA 2007 (as applied by subsection (7) for the purpose of the definition of “excluded activities”), references to the issuing company are to be read as references to the company mentioned in subsection (1).

80Ceasing to meet trading requirement because of administration etcU.K.

(1)A company is not regarded as ceasing to meet the trading requirement merely because of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.

This has effect subject to subsections (2) and (3).

(2)Subsection (1) applies only if—

(a)the entry into administration or receivership, and

(b)everything done as a result of the company concerned being in administration or receivership,

is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(3)A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 78(2)—

(a)a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), any other act is done for the like purpose), or

(b)the company or any of its subsidiaries is dissolved without winding up.

This is subject to subsection (4).

(4)Subsection (3) does not apply if —

(a)the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(b)the company continues, during the winding up, to be a trading company.

(5)References in this section to a company being “in administration” or “in receivership” are to be read in accordance with section 252 of ITA 2007.

81The control and independence requirementU.K.

(1)The control element of the requirement is that—

(a)the company must not control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the company, and

(b)no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 78(3) or otherwise).

(2)The independence element of the requirement is that—

(a)the company must not—

(i)be a 51% subsidiary of another company, or

(ii)be under the control of another company (or of another company and any other person connected with that other company), without being a 51% subsidiary of that other company, and

(b)no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 78(3) or otherwise).

(3)This section is subject to section 87(3).

(4)In this section—

  • arrangements” includes any scheme, agreement or understanding (whether or not legally enforceable),

  • “control”, in subsection (1)(a), is to be read in accordance with sections 450 and 451 (but see section 1124 for the meaning of “control” in subsection (2)(a)(ii)), and

  • qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.

82The qualifying subsidiaries requirementU.K.

(1)The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.

(2)In this section “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.

83The property managing subsidiaries requirementU.K.

(1)The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.

(2)In this section—

  • property managing subsidiary” has the meaning given by section 188(2) of ITA 2007, and

  • qualifying 90% subsidiary” has the meaning given by section 190 of that Act.

84The gross assets requirementU.K.

(1)The gross assets requirement in the case of a single company is that the value of the company's gross assets—

(a)must not exceed £7 million immediately before the shares in respect of which the share loss relief is claimed are issued, and

(b)must not exceed £8 million immediately afterwards.

(2)The gross assets requirement in the case of a parent company is that the value of the group assets—

(a)must not exceed £7 million immediately before the shares in respect of which the share loss relief is claimed are issued, and

(b)must not exceed £8 million immediately afterwards.

(3)The value of the group assets means the sum of the values of the gross assets of each of the members of the group, ignoring any that consist in rights against, or shares in or securities of, another member of the group.

(4)In this section—

  • group” means a parent company and its qualifying subsidiaries,

  • parent company” means a company that has one or more qualifying subsidiaries,

  • qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007, and

  • single company” means a company that does not have one or more qualifying subsidiaries.

85The unquoted status requirementU.K.

(1)The unquoted status requirement is that, at the time (“the relevant time”) at which the shares in respect of which the share loss relief is claimed are issued—

(a)the company must be an unquoted company,

(b)there must be no arrangements in existence for the company to cease to be an unquoted company, and

(c)there must be no arrangements in existence for the company to become a subsidiary of another company (“the new company”) by virtue of an exchange of shares, or shares and securities, if—

(i)section 87 applies in relation to the exchange, and

(ii)arrangements have been made with a view to the new company ceasing to be an unquoted company.

(2)The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time—

(a)listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005(1)(b) of ITA 2007, or

(b)listed on an exchange, or dealt in by any means, designated by an order made for the purposes of section 184(3)(b) or (c) of that Act,

if the order was made after the relevant time.

(3)In this section—

  • arrangements” includes any scheme, agreement or understanding (whether or not legally enforceable),

  • debenture” has the meaning given by section 738 of the Companies Act 2006, and

  • unquoted company” has the meaning given by section 184(2) of ITA 2007.

86Power to amend requirements by Treasury orderU.K.

The Treasury may by order make such amendments of sections 79 to 85 as they consider appropriate.

Qualifying trading companies: supplementaryU.K.

87Relief after an exchange of shares for shares in another companyU.K.

(1)This section and section 88 apply in relation to shares if—

(a)a company (“the new company”) in which the only issued shares are subscriber shares acquires all the shares (“old shares”) in another company (“the old company”),

(b)the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,

(c)the consideration for the new shares of each description consists wholly of old shares of the corresponding description,

(d)new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings, and

(e)by virtue of section 127 of TCGA 1992 as applied by section 135(3) of that Act (company reconstructions etc), the exchange of shares is not to be treated as involving a disposal of the old shares or an acquisition of the new shares.

In this subsection references to shares, except the first and that in the expression “subscriber shares”, include securities.

(2)For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.

(3)Nothing in—

(a)section 74(2) (disposal of new shares), and

(b)section 81 (the control and independence requirement),

applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1) or, in the case of section 81, arrangements with a view to such an exchange.

(4)For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

(5)References in section 88 to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.

88Substitution of new shares for old sharesU.K.

(1)Subsection (2) applies if, in the case of any new shares held by a company or by a nominee for a company, the old shares for which they were exchanged were shares which had been subscribed for by the company (“the investor”).

(2)This Chapter has effect in relation to any subsequent disposal or other event as if—

(a)the new shares had been subscribed for by the investor at the time when, and for the amount for which, the old shares were subscribed for by the investor,

(b)the new shares had been issued by the new company at the time when the old shares were issued to the investor by the old company, and

(c)any requirements of this Chapter which were met at any time before the exchange by the old company had been met at that time by the new company.

(3)Nothing in subsection (2) applies in relation to section 195(7) of ITA 2007 as applied by section 79(7) above for the purpose of the definition of “excluded activities”.

89Deemed time of issue for certain sharesU.K.

(1)This section applies for the purposes of the following provisions—

  • F115...

  • section 84(1)(a) and (2)(a),

  • section 85(1), and

  • section 88(2)(b).

(2)If—

(a)any shares (“the original shares”) have been issued to a company, or are treated under this subsection as having been issued to the company at a particular time, and

(b)any corresponding bonus shares are subsequently issued to the company,

the bonus shares are treated as having been issued at the time the original shares were issued to the company or are treated as having been so issued.

Textual Amendments

F115Words in s. 89(1) omitted (with effect in accordance with s. 38(3) of the amending Act) by virtue of Finance Act 2020 (c. 14), s. 38(2)(b)(iii)

InterpretationU.K.

90Interpretation of ChapterU.K.

F116(1)In this Chapter (subject to subsections (2) to (7))—

  • bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise),

  • corresponding bonus shares”, in relation to any shares, means bonus shares which—

    (a)

    are issued in respect of those shares, and

    (b)

    are in the same company, are of the same class, and carry the same rights, as those shares,

  • excluded company” means a company which—

    (a)

    has a trade which consists wholly or mainly of dealing in land, in commodities or futures or in shares, securities or other financial instruments,

    (b)

    has a trade which is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised,

    (c)

    is a holding company of a group other than a trading group, or

    (d)

    is a building society or a [F117registered society] ,

  • “group” (except in sections 79 and 84) means a company which has one or more 51% subsidiaries together with that or those subsidiaries,

  • holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 51% subsidiaries,

  • investment company” means a company—

    (a)

    whose business consists wholly or mainly in the making of investments, and

    (b)

    which derives the principal part of its income from the making of investments,

    but does not include the holding company of a trading group,

  • [F118registered society” means—

    (a)

    a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014,

    (b)

    a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, [or

    (c)

    an SCE formed in accordance with Council Regulation ( EC ) No 1435/2003 on the Statute for a European Cooperative Society, ]]

  • “shares”—

    (a)

    includes stock, but

    (b)

    does not include shares or stock not forming part of a company's ordinary share capital,

  • share loss relief” has the meaning given by section 68(1),

  • trading company” means a company other than an excluded company which is—

    (a)

    a company whose business consists wholly or mainly in the carrying on of a trade or trades, or

    (b)

    the holding company of a trading group, and

  • trading group” means a group the business of whose members, when taken together, consists wholly or mainly in the carrying on of a trade or trades.

(2)For the purposes of the definition of “corresponding bonus shares” in subsection (1), shares are not treated as being of the same class unless they would be so treated if they were—

(a)included in the official UK list, and

(b)admitted to trading on the London Stock Exchange.

(3)Except as provided by subsection (4), paragraph (b) of the definition of shares in subsection (1) does not apply in the definition of “excluded company” in subsection (1) or in sections 75(3) to (6), (8) and (9) and 87(1) to (4).

(4)Paragraph (b) of that definition applies in relation to the first reference to “shares” in section 87(1).

(5)The definition of “shares” in subsection (1) does not apply in sections 79(5)(a), 84(3) and 85(1)(c) and (2).

(6)For the purposes of the definition of “trading group” in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade.

(7)For the purposes of this Chapter a disposal of shares which results in an allowable loss for the purposes of corporation tax on chargeable gains is treated as made at the time when the disposal is made or treated as made for the purposes of TCGA 1992.

Textual Amendments

F116S. 90(1) amendment to earlier affecting provision 2014 c. 14 Sch. 4 para. 158(3) (1.8.2014) by Finance Act 2014 (c. 26), Sch. 39 paras. 12, 15

Chapter 6U.K.Losses from miscellaneous transactions

91Relief for losses from miscellaneous transactionsU.K.

(1)This section applies if, in an accounting period (“the loss-making period”), a company makes a loss in a transaction within subsection (2).

(2)A transaction is within this subsection if income arising from it would be miscellaneous income of the company.

(3)Relief for the loss is given to the company under this section.

(4)For this purpose the company's miscellaneous income of the loss-making period is reduced by the loss.

(5)Subsection (6) applies to the loss so far as it cannot be used under subsection (4) to reduce the company's income.

(6)The loss—

(a)is carried forward to subsequent accounting periods, and

(b)the company's miscellaneous income of any such period is reduced by the loss so far as it cannot be used under this paragraph to reduce the income of an earlier period.

(7)A company's miscellaneous income is so much of the company's income which—

(a)arises from transactions, and

(b)is chargeable to corporation tax under or by virtue of any provision to which section 1173 applies, other than regulation 18(4) of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (offshore income gains).

Chapter 7U.K.Write-off of government investment

92Loss relief to be reduced if government investment is written offU.K.

(1)This section applies if an amount of government investment in a company (“the written-off amount”) is written off.

(2)The written-off amount is set off against the company's carry-forward losses as at the end of the accounting period ending last before the day of the write-off.

(3)If the written-off amount exceeds those losses, the excess is set off against the company's carry-forward losses as at the end of the next accounting period and so on until the whole of the written-off amount has been set off.

(4)In this Chapter “company” has the meaning given by section 1121 but does not include an unincorporated association.

(5)This section needs to be read with—

  • section 93 (which applies if the company is in a group of companies),

  • section 94 (which explains what is meant by government investment being written off and how the written-off amount is calculated), and

  • section 95 (which explains what is meant by carry-forward losses).

93Groups of companiesU.K.

(1)This section applies if—

(a)at the end of an accounting period a company in which an amount of government investment is written off is in a group of companies, and

(b)under section 92(2) or (3) an amount could be set off against the company's carry-forward losses as at the end of that period (or could be so set off if there were enough of those losses).

(2)The amount may be set off (wholly or partly) against the carry-forward losses of one or more companies within subsection (3), as may be just and reasonable.

(3)A company (other than the company referred to in subsection (1)(a)) is within this subsection if at the end of the accounting period it is in the group of companies.

(4)A “group of companies” consists of a company that has one or more 51% subsidiaries, together with that or those subsidiaries.

94Cases in which government investment is written offU.K.

(1)Government investment in a company is written off if any of the following occurs in relation to the company. This is subject to subsection (2).

  • Case 1

    The company's liability to repay any money lent to it out of public funds by a Minister is extinguished. In this case the written-off amount is the amount of the liability extinguished and the write-off occurs when the liability is extinguished.

  • Case 2

    Any of the company's shares for which a Minister has subscribed out of public funds are cancelled. In this case the written-off amount is the amount subscribed for the shares and the write-off occurs when the shares are cancelled.

  • Case 3

    The company's commencing capital debt (see subsection (3)) is reduced otherwise than by being paid off or its public dividend capital (see subsection (4)) is reduced otherwise than by being repaid (including, in either case, a reduction to nil). In this case the written-off amount is the amount of the reduction and the write-off occurs when the reduction occurs.

(2)The written-off amount is reduced so far as it is replaced by—

(a)money lent, or a payment made, out of public funds, or

(b)shares subscribed for by a Minister for money or money's worth.

(3)Commencing capital debt” means a debt to a Minister assumed as such under an enactment.

(4)Public dividend capital” means an amount paid by a Minister—

(a)under an enactment in which that amount is so described, or

(b)under an enactment corresponding to an enactment in which a payment made on similar terms to another body is so described.

(5)In this section—

  • enactment” includes an Act of the Scottish Parliament, and

  • Minister” means a Minister of the Crown, the Scottish Ministers or a Northern Ireland department.

95Meaning of “carry-forward losses”U.K.

(1)A company's carry-forward losses as at the end of an accounting period are as follows.

  • Type 1

    Losses of the company to be carried forward under section 45, [F11945A, 45B,] 62 or 66 to the next accounting period. These include losses to be treated as expenses of management of the company under section 63 for the next accounting period.

  • Type 2

    Any excess of the company to be carried forward for deduction to the next accounting period under section 1223(3) of CTA 2009.

  • Type 3

    Any excess of the company to be carried forward for deduction to the next accounting period under section 260(2) of CAA 2001.

  • Type 4

    Any qualifying charitable donations made by the company so far as they exceed the company's profits of the accounting period and are available for surrender for the next accounting period under Part 5 (group relief).

  • Type 5

    Allowable losses of the company available under section 8 of TCGA 1992 so far as not allowed for the accounting period or any previous accounting period.

(2)For the purposes of section 92(2) an amount is excluded from a company's carry-forward losses if, before the day of the write-off, a claim is made in relation to the amount under section 37 or Part 5 (group relief) [F120or Part 5A (group relief for carried forward losses)] of this Act or section 260(3) of CAA 2001.

(3)But, for the purposes of section 92(3), any such claim made on or after that day is to be disregarded in determining the company's carry-forward losses as at the end of any accounting period.

(4)The set off of an amount against a company's carry-forward losses as at the end of any accounting period is to be done—

  • first, against those within Types 1 to 4, and

  • second, against those within Type 5.

Textual Amendments

F119Words in s. 95(1) 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. 156(2)

F120Words in s. 95(2) 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. 156(3)

96Interaction with other tax provisionsU.K.

(1)A company, in calculating its profits of a trade for corporation tax purposes, is not prevented from deducting a sum by reason only that an amount of government investment in the company is written off.

(2)Subsection (3) applies for the purposes of section 50 of TCGA 1992 and section 532 of CAA 2001 in their application in relation to a company.

(3)Expenditure is not met by a public body (as defined in section 532(2) of CAA 2001) by reason only that an amount of government investment in the company is written off.

(4)Section 464(1) of CTA 2009 does not prevent section 92 of this Act from applying if the writing-off of an amount of government investment in a company involves the extinguishment (in whole or in part) of a liability under a loan relationship.

Part 5U.K.Group relief

Modifications etc. (not altering text)

C18Pt. 5 applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 125 (with s. 147, Sch. 17)

C19Pt. 5 excluded (with effect in accordance with Sch. 18 para. 63 of the amending Act) by Finance Act 2016 (c. 24), Sch. 18 para. 20(5)

C20Pt. 5 modified by 2009 c. 4, s. 1218ZDB(2) (as inserted (for specified purposes and with effect in accordance with Sch. 6 paras. 20, 21(1)(a) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 6 para. 1 (with Sch. 6 para. 21(3)))

C21Pt. 5 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Risk Transformation (Tax) Regulations 2017 (S.I. 2017/1271), regs. 1(1), 10, 11

Chapter 1U.K.Introduction

97Introduction to PartU.K.

(1)This Part—

(a)allows a company to surrender losses and other amounts, and

(b)enables, in certain cases involving groups or consortiums of companies, other companies to claim corporation tax relief for the losses and other amounts that are surrendered.

(2)The corporation tax relief mentioned in subsection (1) is called “group relief”.

(3)Chapter 2 allows a company within the charge to corporation tax to surrender losses and other amounts it has for an accounting period.

(4)Chapter 3 allows a non-UK resident company that is resident or carrying on a trade in the European Economic Area to surrender losses and other amounts it has for a period.

(5)Chapter 4 sets out how a company may claim group relief in respect of losses and other amounts surrendered, how group relief is given and limitations on the amount of group relief to be given on a claim.

(6)Chapter 5 explains certain key concepts for the purposes of group relief, including (in particular) how to determine if a company is a member of a group of companies or is a member of, or is owned by, a consortium.

(7)Chapter 6 contains provision about persons holding equity in companies and about distributions of companies' profits and assets (which is relevant for the purposes of sections 143(3)(b) and (c) and 144(3)(b) and (c) (in Chapter 4) and section 151(4)(a) and (b) (in Chapter 5)).

(8)Chapter 7 contains definitions that apply for the purposes of this Part and miscellaneous provisions.

(9)For provision about making claims for group relief, see Part 8 of Schedule 18 to FA 1998 (which includes provision in paragraph 76 of that Schedule for the making of assessments or other adjustments if group relief has been given which is, or has become, excessive).

Chapter 2U.K.Surrender of company's losses etc for an accounting period

IntroductionU.K.

98Overview of ChapterU.K.

(1)This Chapter allows a company to surrender losses and other amounts it has for an accounting period.

(2)Sections 99 to 104 set out the basic provisions about the surrendering of losses and other amounts.

(3)Sections 105 to 110 place restrictions on the surrendering of losses and other amounts.

Basic provisions about surrendering losses and other amountsU.K.

99Surrendering of losses and other amountsU.K.

(1)This section applies if a company has one or more of the following for an accounting period—

(a)a trading loss (see section 100),

(b)a capital allowance excess (see section 101),

(c)a deficit within Chapter 16 [F121or 16A] of Part 5 of CTA 2009 (non-trading deficit on loan relationship),

(d)amounts allowable as qualifying charitable donations (see Part 6),

[F122(da)amounts allowable as qualifying expenditure on grassroots sport (see Part 6A),]

(e)a UK property business loss (see section 102),

(f)management expenses (see section 103), and

(g)a non-trading loss on intangible fixed assets (see section 104).

(2)The company may surrender the losses and other amounts under this Chapter so far as the losses and other amounts are eligible for corporation tax relief (apart from this Part).

(3)Subsection (2) applies in relation to losses and other amounts within subsection (1)(a) to (c) even if the company has other profits in the accounting period mentioned in subsection (1) from which the losses and other amounts could be deducted.

(4)But so far as losses and other amounts are within subsection (1)(d) to (g), subsection (2) is subject to the restriction in section 105.

(5)Subsection (2) is also subject to—

(a)sections 106 to 110 (which place further restrictions on what the surrendering company may surrender),

(b)sections 432 and 433 (which restrict relief for expenses treated as incurred under Chapter 3 or 4 of Part 9), and

(c)sections 887 and 888 (which restrict relief in certain cases involving partnership losses in a business of leasing plant or machinery).

(6)Under paragraph 70(1) of Schedule 18 to FA 1998, the company surrenders losses or other amounts, so far as eligible for surrender under this Chapter, by consenting to one or more claims for group relief in relation to the amounts (see Requirement 1 in section 130).

(7)In this Part, in relation to losses or other amounts within subsection (1) that a company has for an accounting period—

  • the surrenderable amounts” means the losses or other amounts so far as eligible for surrender under this Chapter,

  • surrendering company” means the company that has the losses or other amounts, and

  • the surrender period” means the accounting period for which the company has the losses or other amounts.

Textual Amendments

F121Words in s. 99(1)(c) 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. 157

F122S. 99(1)(da) inserted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(3)

100Meaning of “trading loss”U.K.

(1)In section 99(1)(a) “trading loss” means a loss made in a trade in the surrender period.

(2)But it does not include—

(a)a loss made in a trade carried on wholly outside the United Kingdom, or

(b)a loss that is not eligible for relief under section 37 as a result of section 44 or 48.

101Meaning of “capital allowance excess”U.K.

(1)In section 99(1)(b) “capital allowance excess” means an excess of the kind mentioned in section 260(1) of CAA 2001 for the surrender period.

(2)In determining if there is such an excess for the surrender period and, if there is, its amount, apply section 260(1) of CAA 2001 but subject to subsections (3) and (4).

(3)Capital allowances brought forward from previous accounting periods are to be ignored.

(4)The reference in section 260(1) of CAA 2001 to a description of the company's income is to be read as a reference to that description of income before deductions for—

(a)losses of any accounting period other than the surrender period, or

(b)capital allowances.

102Meaning of “UK property business loss”U.K.

(1)In section 99(1)(e) “UK property business loss” means a loss made in a UK property business in the surrender period.

(2)But it does not include a loss treated as made in the surrender period as a result of section 62(5).

103Meaning of “management expenses”U.K.

(1)In section 99(1)(f) “management expenses” means expenses that are deductible for the surrender period under section 1219 of CTA 2009.

(2)But it does not include—

(a)expenses that are deductible for the surrender period as a result of section 1223 of CTA 2009, or

(b)amounts treated as expenses deductible for the surrender period as a result of section 63 above.

104Meaning of “non-trading loss on intangible fixed assets”U.K.

(1)In section 99(1)(g) “non-trading loss on intangible fixed assets” is to be read in accordance with Part 8 of CTA 2009.

[F123(2)But it does not include a loss treated as a non-trading loss on intangible fixed assets for the surrender period as a result of section 753(3) of CTA 2009.]

Textual Amendments

F123S. 104(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 158

Restrictions on losses and other amounts that may be surrenderedU.K.

105Restriction on surrender of losses etc within section 99(1)(d) to (g)U.K.

(1)This section applies if the surrendering company has for the surrender period losses or other amounts within section 99(1)(d) to (g) (“relevant amounts”) that are eligible for corporation tax relief (apart from this Part).

(2)The surrendering company may not surrender any relevant amount under this Chapter unless the total of the relevant amounts exceeds [F124the profit-related threshold] .

(3)If the total of the relevant amounts does exceed [F125the profit-related threshold]

(a)the surrendering company may surrender relevant amounts, but

(b)the total amount that may be surrendered is limited to the amount of the excess.

[F126(3A)The profit-related threshold” is the sum of—

(a)the surrendering company's gross profits of the surrender period, and

(b)where chargeable profits of a CFC for an accounting period ending in the surrender period are apportioned to the surrendering company in accordance with step 3 in subsection (1) of 371BC of TIOPA 2010 and the surrendering company is in relation to that accounting period of the CFC a chargeable company for the purposes of step 4 in that subsection, the total of the chargeable profits so apportioned.

(3B)Where—

(a)an accounting period of a CFC ending in the surrender period is one to which (because of paragraph 50 of Schedule 20 of FA 2012) the repeal of Chapter 4 of Part 17 of ICTA does not apply,

(b)chargeable profits of the CFC for that accounting period are apportioned to the surrendering company in accordance with sections 747(3) and 752 of ICTA, and

(c)the surrendering company is not prevented by section 747(5) of ICTA from being chargeable to tax in respect of the CFC for that accounting period,

the profit-related threshold also includes the total of the chargeable profits so apportioned.]

(4)If the surrendering company surrenders relevant amounts, the amount surrendered is treated as consisting of—

(a)first, donations within section 99(1)(d),

[F127(aa)second, expenditure within section 99(1)(da),]

(b)[F128third], losses within section 99(1)(e),

(c)[F129fourth], expenses within section 99(1)(f), and

(d)[F130fifth], losses within section 99(1)(g).

(5)For the purposes of this section the surrendering company's gross profits of the surrender period are its profits for that period without any of the following—

(a)a deduction in respect of any of the kinds of thing mentioned in section 99(1),

(b)a deduction falling to be made in respect of losses, allowances or other amounts of any other period (whether or not in respect of a kind of thing so mentioned), and

(c)a deduction falling to be made by virtue of section 63 of this Act or section 1223(3) of CTA 2009 (other amounts carried forward).

[F131(5A)For the purposes of this section—

  • CFC” has the same meaning as in Part 9A of TIOPA 2010, except that in subsection (3B) it means a controlled foreign company as defined by section 747(2) of ICTA;

  • chargeable profits”, in relation to a CFC, is to be read in accordance with section 371BA(3) of TIOPA 2010, except that in subsection (3B) it is to be read in accordance with section 747(6) of ICTA.]

(6)This section is subject to section 305 (oil activities: availability of group relief against ring fence profits).

Textual Amendments

F124Words in s. 105(2) substituted (with effect in accordance with s. 29(6)-(9) of the amending Act) by Finance Act 2013 (c. 29), s. 29(2)

F125Words in s. 105(3) substituted (with effect in accordance with s. 29(6)-(9) of the amending Act) by Finance Act 2013 (c. 29), s. 29(3)

F126S. 105(3A)(3B) inserted (with effect in accordance with s. 29(6)-(9) of the amending Act) by Finance Act 2013 (c. 29), s. 29(4)

F127S. 105(4)(aa) inserted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(4)(a)

F128Word in s. 105(4)(b) substituted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(4)(b)

F129Word in s. 105(4)(c) substituted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(4)(c)

F130Word in s. 105(4)(d) substituted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(4)(d)

F131S. 105(5A) inserted (with effect in accordance with s. 29(6)-(9) of the amending Act) by Finance Act 2013 (c. 29), s. 29(5)

106Restriction on losses etc surrenderable by UK residentU.K.

(1)This section applies if the surrendering company is UK resident.

(2)The surrendering company may not surrender a loss or other amount under this Chapter so far as the loss or other amount—

(a)is attributable to a permanent establishment through which the company carries on a trade outside the United Kingdom (see subsection (3)), and

(b)is, or represents, an amount within subsection (5).

(3)A loss or other amount is attributable to a permanent establishment of the surrendering company if (ignoring this section) the amount could be included in the company's surrenderable amounts for the surrender period if those amounts were determined—

(a)by reference to that establishment alone, and

(b)by applying, in relation to that establishment, principles corresponding in all material respects to those mentioned in subsection (4).

(4)The principles are those that would be applied for corporation tax purposes in determining an equivalent loss or other amount in the case of a permanent establishment through which a non-UK resident company carries on a trade in the United Kingdom.

(5)An amount is within this subsection if, for the purposes of non-UK tax (see section 187) chargeable under the law of the territory in which the permanent establishment is situated, the amount is (in any period) deductible from or otherwise allowable against non-UK profits (see section 108) of a person other than the surrendering company.

(6)Subsection (7) applies for the purposes of subsection (5) if, in order to determine if an amount is deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is deductible or otherwise allowable for tax purposes in the United Kingdom.

(7)The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned if (and only if) the surrendering company is treated as resident in that territory for the purposes of the non-UK tax.

107Restriction on losses etc surrenderable by non-UK residentU.K.

(1)This section applies if the surrendering company is a [F132non-UK resident [F133company within the charge to corporation tax]].

[F134(1A)If the surrendering company is established in the EEA (within the meaning of section 134A), it may surrender a loss or other amount under this Chapter only so far as conditions A and B are met.

Subsection (6A) imposes restrictions on a surrender under this subsection.]

(2)[F135In any other case, the] surrendering company may surrender a loss or other amount under this Chapter only so far as conditions A, B and C are met in relation to the loss or other amount.

(3)Condition A is that the loss or other amount is attributable to activities of the surrendering company in respect of which it is within the charge to corporation tax for the surrender period.

(4)Condition B is that the loss or other amount is not attributable to activities of the surrendering company that are double taxation exempt for the surrender period (see section 186).

(5)Condition C is that—

(a)the loss or other amount does not correspond to, and is not represented in, an amount within subsection (6), and

(b)no amount brought into account in calculating the loss or other amount corresponds to, or is represented in, an amount within subsection (6).

(6)An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of a territory, the amount is (in any period) deductible from or otherwise allowable against non-UK profits of any person.

[F136(6A)A loss or other amount may not be surrendered by virtue of subsection (1A) if and to the extent that it, or any amount brought into account in calculating it, corresponds to, or is represented in, amounts within subsection (6B).

(6B)An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of a territory, the amount is (in any period) deducted from or otherwise allowed against non-UK profits of any person.]

(7)But an amount is not to be taken to be within subsection (6) [F137or (6B) ] by reason only that it is—

(a)an amount of profits brought into account for the purpose of being excluded from non-UK profits of the person, or

(b)an amount brought into account in calculating an amount of profits brought into account as mentioned in paragraph (a).

(8)Subsection (9) applies for the purposes of subsection (6) if, in order to determine if an amount is deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is deductible or otherwise allowable for tax purposes in the United Kingdom.

(9)The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned.

Textual Amendments

F132Words in s. 107(1) substituted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 76(10) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2))

F133Words in s. 107(1) substituted (6.4.2020) by Finance Act 2019 (c. 1), Sch. 5 paras. 30, 35 (with Sch. 5 para. 36)

F134S. 107(1A) inserted (with effect in accordance with s. 30(6)-(8) of the amending Act) by Finance Act 2013 (c. 29), s. 30(2)

F135Words in s. 107(2) substituted (with effect in accordance with s. 30(6)-(8) of the amending Act) by Finance Act 2013 (c. 29), s. 30(3)

F136S. 107(6A)(6B) inserted (with effect in accordance with s. 30(6)-(8) of the amending Act) by Finance Act 2013 (c. 29), s. 30(4)

F137Words in s. 107(7) inserted (with effect in accordance with s. 30(6)-(8) of the amending Act) by Finance Act 2013 (c. 29), s. 30(5)

108Meaning of “non-UK profits”U.K.

(1)In sections 106 and 107 “non-UK profits”, in relation to a person, means—

(a)amounts within subsection (2), or

(b)amounts taken into account in calculating amounts within subsection (2).

(2)Amounts are within this subsection if they—

(a)are taken for the purposes of the non-UK tax in question to be the amount of the profits, income or gains on which (after allowing for deductions) the person is charged with that tax, and

(b)are not amounts corresponding to, and are not represented in, the total profits of any person of any accounting period.

(3)For the purposes of subsection (2)(b) amounts that arise from activities of a non-UK resident company that are double taxation exempt for an accounting period (see section 186) are excluded from the company's total profits of that period.

109Restriction on losses etc surrenderable by dual residentU.K.

(1)This section applies if in the surrender period the surrendering company is UK resident and is also within a charge to non-UK tax under the law of a territory because—

(a)it derives its status as a company from that law,

(b)its place of management is in that territory, or

(c)it is for some other reason treated under that law as resident in that territory for the purposes of that tax.

(2)If condition A, B or C is met, the surrendering company may not surrender any losses or other amounts under this Chapter.

(3)Condition A is that the surrendering company is not a trading company throughout the surrender period.

(4)Condition B is that in the surrender period the surrendering company carries on a trade of such a description that the company's main function, or one of its main functions, consists of one or more of the following activities.

  • Activity 1

    Acquiring and holding shares, securities or investments of any other kind (whether directly or indirectly).

  • Activity 2

    Making, under loan relationships, payments in relation to which debits fall to be brought into account for the purposes of Part 5 of CTA 2009.

  • Activity 3

    Making payments which are qualifying charitable donations.

  • Activity 4

    Making payments similar to those within Activity 3 but which are deductible in calculating the profits of the surrendering company for corporation tax purposes.

  • Activity 5

    Obtaining funds for the purposes of, or otherwise in connection with, any of Activities 1 to 4.

(5)Condition C is that in the surrender period the surrendering company carries on one or more of Activities 1 to 5—

(a)to an extent that does not appear to be justified by any trade which it carries on, or

(b)for a purpose that does not appear to be appropriate to any such trade.

110Restriction on surrender of losses etc from alternative finance arrangementsU.K.

(1)This section applies if the surrendering company is prevented from obtaining a deduction in respect of an amount by section 520 of CTA 2009 (provision not at arm's length: non-deductibility of relevant return).

(2)The amount may not be surrendered under this Chapter.

Chapter 3U.K.Surrenders made by non-UK resident company resident or trading in the EEA

IntroductionU.K.

111Overview of ChapterU.K.

(1)This Chapter allows a non-UK resident company that is resident or carrying on a trade in the European Economic Area to surrender losses and other amounts it has for a period.

(2)Section 113 sets out the basic provisions about the surrendering of losses and other amounts.

(3)Sections 114 to 121 set out conditions that must be met if losses and other amounts are to be surrendered (see Step 2 in section 113(2)).

(4)Sections 122 to 128 set out other rules, assumptions and exclusions (see Steps 3 and 5 in section 113(2)).

112EEA related definitionsU.K.

In this Chapter—

  • EEA accounting period” means a period for which an EEA related company has a loss or other amount,

  • EEA amount” has the meaning given under Step 1 of section 113(2),

  • EEA related company” means a non-UK resident company that—

    (a)

    is resident in an EEA territory, or

    (b)

    is not resident in any EEA territory but is carrying on a trade in an EEA territory through a permanent establishment, and

  • EEA territory”, in relation to any time, means a territory outside the United Kingdom that is within the European Economic Area at that time.

Basic provisions about surrendering losses and other amountsU.K.

113Steps to determine extent to which loss etc can be surrenderedU.K.

(1)This section applies if an EEA related company has a loss or other amount for an EEA accounting period.

(2)Take the following steps to determine the extent to which the EEA related company may surrender the loss or other amount under this Chapter.

  • Step 1

    Determine the extent to which (if at all) the loss or other amount is eligible for corporation tax relief (apart from this Chapter). The loss or other amount may be surrendered only so far as it is not so eligible. A loss or other amount, so far as surrenderable under this Step, is referred to in this Chapter as an “EEA amount”.

  • Step 2

    Determine the extent to which the EEA amount in question meets—

    (a)

    the equivalence condition (see section 114),

    (b)

    the EEA tax loss condition (see sections 115 and 116),

    (c)

    the qualifying loss condition (see sections 117 to 120), and

    (d)

    the precedence condition (see section 121).

    References to “the qualifying part of the EEA amount” are references to the EEA amount so far as it meets all those conditions.

  • Step 3

    Recalculate the EEA amount in accordance with section 128 using the assumptions set out in sections 123 to 126. The result is called “the recalculated EEA amount”.

  • Step 4

    Determine the amount that may be surrendered. That amount is—

    (a)

    the qualifying part of the EEA amount, or

    (b)

    if less, an amount equal to the relevant proportion of the recalculated EEA amount.

    If the recalculated EEA amount is an amount of income or other profits, the amount that may be surrendered is nil.“The relevant proportion” is the same as the proportion that the qualifying part of the EEA amount bears to the EEA amount.

  • Step 5

    Determine the extent to which (if at all) the amount resulting from Step 4 is excluded by section 127. If any of that amount is excluded, reduce it accordingly.

(3)If in recalculating the EEA amount at Step 3 it is to be assumed under section 125 that there are two or more accounting periods in relation to the EEA accounting period, the total of the amounts apportioned to the assumed accounting periods available for surrender under subsection (2) is not to exceed the qualifying part of the EEA amount.

(4)Under paragraph 70(1) of Schedule 18 to FA 1998, an EEA related company surrenders an EEA amount, so far as eligible for surrender under this Chapter, by consenting to one or more claims for group relief in relation to the amount (see Requirement 1 in section 135).

(5)In this Part, in relation to losses or other amounts that an EEA related company has for an EEA accounting period—

  • the surrenderable amounts” means the losses or other amounts so far as eligible for surrender under this Chapter,

  • surrendering company” means the company that has the losses or other amounts, and

  • the surrender period” means the assumed accounting period under section 125 for which the company is taken to have the surrenderable amounts.

Conditions that must be metU.K.

114The equivalence conditionU.K.

An EEA amount meets the equivalence condition so far as it corresponds (in all material respects) to a loss or other amount within section 99(1)(a) to (g).

115The EEA tax loss condition: companies resident in EEA territoryU.K.

(1)In the case of a surrendering company that is resident in an EEA territory (“the resident EEA territory”), an EEA amount meets the EEA tax loss condition so far as—

(a)subsection (2) applies to the amount, and

(b)the amount is not excluded by subsection (3).

(2)This subsection applies to the EEA amount so far as it is calculated in accordance with the rules of the resident EEA territory that are applicable for determining, in the surrendering company's case, the amount of any loss or other amount eligible for relief from any non-UK tax (see section 187) chargeable under the law of the resident EEA territory.

(3)The EEA amount is excluded so far as, for corporation tax purposes, it is attributable to a permanent establishment through which the surrendering company carries on a trade in the United Kingdom.

116The EEA tax loss condition: companies not resident in EEA territoryU.K.

(1)In the case of a surrendering company that is not resident in any EEA territory but is carrying on a trade in an EEA territory (“the relevant EEA territory”) through a permanent establishment, an EEA amount meets the EEA tax loss condition so far as—

(a)subsection (2) applies to the amount, and

(b)the amount is not excluded by subsection (3).

(2)This subsection applies to the EEA amount so far as it is calculated in accordance with the rules in the relevant EEA territory that are applicable for determining, in the surrendering company's case, the amount of any loss or other amount eligible for relief from any non-UK tax chargeable under the law of the relevant EEA territory.

(3)The EEA amount is excluded so far as it is attributable to activities of the surrendering company that are subject to relieving arrangements.

(4)Relieving arrangements” means arrangements within subsection (5) that have the effect mentioned in subsection (6) (or would have that effect if a claim were made).

(5)Arrangements are within this subsection if they are made with a view to affording relief from double taxation in relation to—

(a)any non-UK tax chargeable under the law of the relevant EEA territory and any non-UK tax chargeable under the law of any other territory, or

(b)any non-UK tax chargeable under the law of the relevant EEA territory and United Kingdom income or corporation tax.

(6)The effect referred to in subsection (4) is that the income or gains arising for the EEA accounting period from the activities are ignored in calculating the surrendering company's profits, income or gains chargeable to non-UK tax under the law of the relevant EEA territory for that period.

117The qualifying loss condition: generalU.K.

(1)An EEA amount meets the qualifying loss condition so far as sections 118, 119 and 120 apply to it.

(2)In this section and sections 118 to 120, “the relevant EEA territory” means—

(a)the EEA territory in which the surrendering company is resident, or

(b)(as the case may be) the EEA territory in which the surrendering company carries on a trade through a permanent establishment.

(3)In sections 118 and 119 “relevant non-UK tax” means any non-UK tax chargeable under the law of the relevant EEA territory or any other resident territory.

(4)A “resident territory” is—

(a)if the surrendering company is resident in an EEA territory and is also resident in another territory outside the United Kingdom, that other territory, or

(b)if the surrendering company is not resident in any EEA territory, the territory (or territories) in which it is resident.

118The qualifying loss condition: relief for current and previous periodsU.K.

(1)This section applies to an EEA amount so far as subsections (2) and (3) apply to it (but subject to subsection (4)).

(2)This subsection applies to the EEA amount so far as, for the purposes of any relevant non-UK tax, the EEA amount cannot be taken into account in calculating any profits, income or gains that—

(a)arise in the EEA accounting period or any previous period to the surrendering company or any other person, and

(b)are chargeable to that tax for the EEA accounting period or any previous period.

(3)This subsection applies to the EEA amount so far as, for the purposes of any relevant non-UK tax, the EEA amount cannot be relieved in the EEA accounting period or any previous period—

(a)by the payment of a credit,

(b)by the elimination or reduction of a tax liability, or

(c)in any other way.

(4)This section applies to the EEA amount (or a part of it) only if every step is taken (whether by the surrendering company or any other person) to secure that the EEA amount (or part) is—

(a)taken into account as mentioned in subsection (2), or

(b)relieved as mentioned in subsection (3).

119The qualifying loss condition: relief for future periodsU.K.

(1)This section applies to an EEA amount so far as subsections (2) and (3) apply to it.

(2)This subsection applies to the EEA amount so far as, for the purposes of any relevant non-UK tax, the EEA amount cannot be taken into account in calculating any profits, income or gains that—

(a)might arise in any period after the EEA accounting period to the surrendering company or any other person, and

(b)(if there were any) would be chargeable to that tax for any period after the EEA accounting period.

(3)This subsection applies to the EEA amount so far as, for the purposes of any relevant non-UK tax, the EEA amount cannot be relieved in any period after the EEA accounting period—

(a)by the payment of a credit,

(b)by the elimination or reduction of a tax liability, or

(c)in any other way.

(4)The determination as to the extent to which the EEA amount—

(a)cannot be taken into account as mentioned in subsection (2), or

(b)cannot be relieved as mentioned in subsection (3),

is to be made as at the time immediately after the end of the EEA accounting period.

120The qualifying loss condition: non-UK tax relief in another territoryU.K.

(1)This section applies to an EEA amount so far as it is not excluded by subsection (2) or (3).

(2)The EEA amount is excluded so far as, for the purposes of any non-UK tax chargeable under the law of any territory other than the relevant EEA territory, it has been taken into account in calculating any profits, income or gains that—

(a)have arisen in any period to the surrendering company or any other person, and

(b)were chargeable to that tax for the period (or would have been so chargeable had the EEA amount not been so taken into account).

(3)The EEA amount is excluded so far as, for the purposes of any non-UK tax chargeable under the law of any territory other than the relevant EEA territory, it has been relieved in any period—

(a)by the payment of a credit,

(b)by the elimination or reduction of a tax liability, or

(c)in any other way.

121The precedence conditionU.K.

(1)An EEA amount meets the precedence condition so far as no relief can be given for it in any territory which—

(a)is outside the United Kingdom,

(b)is not the relevant EEA territory (as defined by section 117(2)), and

(c)is within subsection (2).

(2)A territory is within this subsection if—

(a)a company resident in the territory owns (directly or indirectly) ordinary share capital in the surrendering company,

(b)a UK resident company owns (directly or indirectly) ordinary share capital in the company resident in the territory,

(c)the surrendering company is a 75% subsidiary of the UK resident company, and

(d)the surrendering company is not such a subsidiary as a result of its being a 75% subsidiary of another UK resident company.

(3)In subsection (1) the reference to relief being given in any territory is a reference to relief being given—

(a)by taking the EEA amount (or a part of it) into account in calculating any profits, income or gains of any person chargeable to non-UK tax under the law of the territory,

(b)by the payment of a credit to any person under that law,

(c)by the elimination or reduction of a tax liability of any person under that law, or

(d)in any other way.

(4)Chapter 5 explains how to determine if a company is a 75% subsidiary of another company.

Other rules, assumptions and exclusionsU.K.

122Assumptions to be made in recalculating EEA amountU.K.

Sections 123 to 126 apply for the purpose of recalculating the EEA amount at Step 3 in section 113.

123Assumptions as to UK residenceU.K.

(1)Assume that the surrendering company is UK resident throughout the EEA accounting period.

(2)But this does not require it to be assumed—

(a)that there is any change in the place or places at which the surrendering company carries on its activities (although see section 124), or

(b)that the surrendering company ceases to be UK resident at the end of the EEA accounting period.

(3)Assume that the surrendering company becomes UK resident (and, therefore, within the charge to corporation tax) at the beginning of the EEA accounting period.

124Assumptions as to places in which activities carried onU.K.

(1)If during the EEA accounting period the surrendering company carries on a trade wholly or partly in the relevant EEA territory, assume that the trade is carried on wholly or partly in the United Kingdom.

(2)If the surrendering company holds any estate, interest or rights in or over land in the relevant EEA territory, assume that the land is in the United Kingdom.

(3)For the purposes of subsection (2) the reference to holding an estate, interest or rights in or over land in the relevant EEA territory is to be read so as to produce the result that most closely corresponds with that produced by applying those concepts of law in relation to a UK property business or land in the United Kingdom.

(4)In this section “the relevant EEA territory” means—

(a)the EEA territory in which the surrendering company is resident, or

(b)(as the case may be) the EEA territory in which the surrendering company carries on a trade through a permanent establishment.

125Assumptions as to accounting periodsU.K.

(1)Assume that an accounting period of the surrendering company begins at the beginning of the EEA accounting period.

(2)Assume that the accounting period ends—

(a)when the EEA accounting period ends, or

(b)if earlier, at the end of 12 months.

(3)If the accounting period ends before the end of the EEA accounting period, assume that a further accounting period then begins and so on until the EEA accounting period ends.

(4)Assume that any further accounting period ends—

(a)at the end of 12 months, or

(b)if earlier, when the EEA accounting period ends.

126Assumptions in relation to capital allowancesU.K.

(1)This section applies if, before the EEA accounting period, the surrendering company incurs capital expenditure on the provision of plant or machinery for the purposes of any activity.

(2)For the purposes of Part 2 of CAA 2001 assume that the plant or machinery—

(a)was provided for purposes wholly other than those of the activity, and

(b)was not brought into use for the purposes of the activity until the beginning of the EEA accounting period,

and section 13 of CAA 2001 is to apply accordingly.

(3)This section is to be read as if contained in Part 2 of CAA 2001.

127Amounts excluded because of certain arrangementsU.K.

(1)An amount (or part of an amount) resulting from Step 4 in section 113 is excluded if—

(a)it is not attributable for corporation tax purposes to any permanent establishment through which the surrendering company carries on a trade in the United Kingdom, and

(b)the following condition is met.

(2)The condition is that the amount (or part)—

(a)would not have resulted from Step 4 but for any arrangements within subsection (3), or

(b)would not have arisen to the surrendering company but for any such arrangements.

(3)Arrangements are within this subsection if their main purpose, or one of their main purposes, is to secure that the amount (or part) may be surrendered for the purposes of group relief.

(4)Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

128Rules for recalculating EEA amountU.K.

(1)For the purposes of Step 3 in section 113 the EEA amount is to be recalculated in accordance with any provision made by or under the Corporation Tax Acts—

(a)that applies for the purpose of calculating for corporation tax purposes losses or other amounts to which the EEA amount corresponds, or

(b)that otherwise affects in any way the amount of those losses or other amounts that is eligible for corporation tax relief.

(2)For the purposes of subsection (1) the Treasury may by regulations provide for the modification of any provision made by or under the Corporation Tax Acts—

(a)that applies as mentioned in subsection (1)(a), or

(b)that otherwise affects an amount as mentioned in subsection (1)(b).

(3)Regulations under subsection (2) may make provision in relation to—

(a)all classes of trade or business, or

(b)any particular class or classes of trade or business.

(4)Regulations under subsection (2) may—

(a)make different provision for different cases or different purposes,

(b)contain incidental, supplemental, consequential and transitional provision and savings, and

(c)make provision having retrospective effect.

Chapter 4U.K.Claims for group relief

IntroductionU.K.

129Overview of ChapterU.K.

(1)This Chapter sets out how a company may claim group relief, how group relief is given and limitations on the amount of group relief to be given on a claim.

(2)[F138Sections 130 to [F139134]] deal with claims in relation to surrenderable amounts under Chapter 2.

(3)Sections 135 and 136 deal with claims in relation to surrenderable amounts under Chapter 3.

(4)Section 137 deals with how group relief is given.

(5)Sections 138 to 142 set out a limitation on the amount of group relief to be given on any claim.

(6)Sections 143 to 149 set out limitations on the amount of group relief to be given on claims based on consortium condition 1, consortium condition 2 or consortium condition 3 (see Requirement 3 in section 130).

Textual Amendments

F138Words in s. 129(2) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 2

F139Word in s. 129(2) substituted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(2)(a)

Surrenderable amounts under Chapter 2U.K.

130Group relief claims on amounts surrenderable under Chapter 2U.K.

(1)This section applies in relation to the surrendering company's surrenderable amounts for the surrender period under Chapter 2.

(2)A company (“the claimant company”) may make a claim for group relief for an accounting period (“the claim period”) in relation to those amounts (in whole or in part) if the following requirements are met.

  • Requirement 1

    The surrendering company consents to the claim.

  • Requirement 2

    There is a period (“the overlapping period”) that is common to the claim period and the surrender period.

  • Requirement 3

    At a time during the overlapping period—

    (a)

    the group condition is met (see section 131),

    (b)

    consortium condition 1 is met (see section 132),

    (c)

    consortium condition 2 is met (see section [F140section 133(1)[F141, (3) and (4)]]), or

    (d)

    consortium condition 3 is met (see [F142section 133(2) to [F143(4)]]).

(3)More than one company may make a claim for group relief in relation to any surrenderable amounts (but the giving of group relief in relation to any claim is subject to the provisions of this Chapter).

Textual Amendments

F140Words in s. 130(2)(c) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 3(a)

F141Words in s. 130(2)(c) substituted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(2)(b)(i)

F142Words in s. 130(2)(d) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 3(b)

F143Word in s. 130(2)(d) substituted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(2)(b)(ii)

Modifications etc. (not altering text)

C22S. 130(2) applied by 1998 c. 36, Sch. 18 para. 70(1) (as substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 114(2))

131The group conditionU.K.

(1)The group condition is met if the surrendering company and the claimant company—

(a)are members of the same group of companies (see section 152), and

(b)are both UK related.

(2)For the meaning of “UK related” in subsection (1)(b) and in sections 132 and 133, see section 134.

132Consortium condition 1U.K.

(1)Consortium condition 1 is met if subsection (2) or (3) applies.

(2)This subsection applies if—

(a)the surrendering company is a trading company or a holding company,

(b)the surrendering company is owned by a consortium,

(c)the claimant company is a member of the consortium, and

(d)both companies are UK related.

(3)This subsection applies if—

(a)the claimant company is a trading company or a holding company,

(b)the claimant company is owned by a consortium,

(c)the surrendering company is a member of the consortium, and

(d)both companies are UK related.

(4)But consortium condition 1 is not met if a profit on a sale within subsection (5) by the company that is the member of the consortium would be a trading receipt of the member.

(5)A sale is within this subsection if it is a sale of—

(a)the share capital the member owns in the company owned by the consortium, or

(b)if that company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), the share capital the member owns in the holding company in question.

133Consortium conditions 2 and 3U.K.

(1)Consortium condition 2 is met if—

(a)the surrendering company is a trading company or a holding company,

(b)the surrendering company is owned by a consortium,

(c)the claimant company is not a member of the consortium,

(d)the claimant company is a member of the same group of companies as a third company (“the link company”),

(e)the link company is a member of the consortium, F144... [F145and]

[F146(f) the surrendering company and the claimant company are both UK related, F147...

F147(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(2)Consortium condition 3 is met if—

(a)the claimant company is a trading company or a holding company,

(b)the claimant company is owned by a consortium,

(c)the surrendering company is not a member of the consortium,

(d)the surrendering company is a member of the same group of companies as a third company (“the link company”),

(e)the link company is a member of the consortium, F148... [F149and]

[F150(f) the surrendering company and the claimant company are both UK related, F151...

F151(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(3)But neither consortium condition 2 nor consortium condition 3 is met if a profit on a sale within subsection (4) by the link company would be a trading receipt of that company.

(4)A sale is within this subsection if it is a sale of—

(a)the share capital the link company owns in the company (“the consortium company”) owned by the consortium as mentioned in subsection (1)(b) or (2)(b), or

(b)if the consortium company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), the share capital the link company owns in the holding company in question.

F152(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F152(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F152(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F152(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F144Word in s. 133(1)(e) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 4(2)(a)

F145Word in s. 133(1)(e) inserted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(1)(a)(i)

F146S. 133(1)(f)(g) substituted for s. 133(1)(f) (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 4(2)(b)

F147S. 133(1)(g) and preceding word omitted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 35(1)(a)(ii)

F148Word in s. 133(2)(e) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 4(3)(a)

F149Word in s. 133(2)(e) inserted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(1)(b)(i)

F150S. 133(2)(f)(g) substituted for s. 133(2)(f) (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 4(3)(b)

F151S. 133(2)(g) and preceding word omitted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 35(1)(b)(ii)

F152S. 133(5)-(8) omitted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 35(1)(c)

134Meaning of “UK related” companyU.K.

For the purposes of sections 131 to 133 a company is UK related if—

(a)it is a UK resident company, or

(b)it is a non-UK resident company [F153within the charge to corporation tax].

Textual Amendments

F153Words in s. 134(b) substituted (with effect in accordance with s. 24(3) of the amending Act) by Finance Act 2019 (c. 1), s. 24(1)

F154134ACompanies “established in the EEA”U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F154S. 134A omitted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 35(2)(c)

Surrenderable amounts under Chapter 3U.K.

135Group relief claims on amounts surrenderable under Chapter 3U.K.

(1)This section applies in relation to the surrendering company's surrenderable amounts for the surrender period under Chapter 3.

(2)A company (“the claimant company”) may make a claim for group relief for an accounting period (“the claim period”) in relation to those amounts (in whole or in part) if the following requirements are met.

  • Requirement 1

    The surrendering company consents to the claim.

  • Requirement 2

    There is a period (“the overlapping period”) that is common to the claim period and the surrender period.

  • Requirement 3

    The EEA group condition is met (see section 136) at a time during the overlapping period.

(3)More than one company may make a claim for group relief in relation to any surrenderable amounts (but the giving of group relief in relation to any claim is subject to the provisions of this Chapter).

Modifications etc. (not altering text)

C23S. 135(2) applied by 1998 c. 36, Sch. 18 para. 70(1) (as substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 114(2))

136The EEA group conditionU.K.

(1)The EEA group condition is met if subsection (2) or (3) applies.

(2)This subsection applies if—

(a)the surrendering company is a 75% subsidiary of the claimant company, and

(b)the claimant company is UK resident.

(3)This subsection applies if—

(a)both the surrendering company and the claimant company are 75% subsidiaries of a third company, and

(b)the third company is UK resident.

(4)Chapter 5 explains how to determine if a company is a 75% subsidiary of another company.

Giving of group reliefU.K.

137Deduction from total profitsU.K.

(1)If the claimant company makes a claim as mentioned in section 130 or 135, the group relief is given by the making of a deduction from the claimant company's total profits of the claim period.

(2)The amount of the deduction is—

(a)an amount equal to the surrendering company's surrenderable amounts for the surrender period, or

(b)if the claim is in relation to only part of those amounts, an amount equal to that part.

(3)Subsection (2) is subject to—

(a)subsections (4) to (7),

(b)the limitation set out in sections 138 to 142 that applies in relation to all claims for group relief,

(c)the limitations set out in sections 143 to 149 that apply in relation to claims based on consortium condition 1, consortium condition 2 or consortium condition 3,

(d)Chapter 3 of Part 4 (relief in cases involving trading losses made in limited partnerships or limited liability partnerships), and

(e)section 305(1) (group relief in cases involving oil activities etc).

(4)The deduction is to be made—

(a)before deductions for relief within subsection (5), but

(b)after all other deductions to be made at Step 2 in section 4(2) (apart from deductions for group relief on other claims).

(5)The deductions within this subsection are deductions for relief—

(a)under section 37 in relation to a loss made in an accounting period after the claim period,

(b)under section 260(3) of CAA 2001 in relation to capital allowances for an accounting period after the claim period, F155...

(c)under section 389[F156, 459 or 463B] of CTA 2009 in relation to a deficit for a deficit period after the claim period[F157, and

(d)under section 188CK (giving of group relief for carried-forward losses: deductions from total profits)]

(6)For the purposes of subsection (4)(b) it is to be assumed that the claimant company has claimed all relief available to it for the claim period under section 37 of this Act or section 260(3) of CAA 2001.

(7)Corporation tax relief is not to be given more than once for the same amount, whether—

(a)by giving group relief and by giving some other relief (for any accounting period) to the surrendering company, or

(b)by giving group relief more than once.

Textual Amendments

F155Word in s. 137(5)(b) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 159(a)

F156Words in s. 137(5)(c) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 159(b)

F157S. 137(5)(d) and word 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. 159(c)

Modifications etc. (not altering text)

C24S. 137(7) applied by 2012 c. 14, ss. 124A(6), 124B(7), 124C(7) (as 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. 26)

General limitation on amount of group relief to be givenU.K.

138Limitation on amount of group relief applying to all claimsU.K.

The amount of group relief to be given on a claim (“the current claim”) is limited to—

(a)the unused part of the surrenderable amounts (see section 139), or

(b)if less, the unrelieved part of the claimant company's available total profits of the claim period (see section 140).

139Unused part of the surrenderable amountsU.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 a claim by any company for group relief in respect of the whole or a part of the amounts that, in relation to the current claim, are the surrendering company's surrenderable amounts for the surrender period,

(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 in relation to the prior claim (see subsection (6)).

(6)To determine the previously used amount of group relief 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 given on the prior claim.

The previously used amount of group relief 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 142.

140Unrelieved part of claimant company's available total profitsU.K.

(1)The unrelieved part of the claimant company's available total profits of the claim period is the amount equal to—

(a)the company's available total profits for the overlapping period (see subsection (2)), less

(b)the amount of previously claimed group relief for that period (see subsection (3)).

(2)To determine the available total profits for the overlapping period—

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

(b)apply that proportion to the available total profits of the claim period.

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

(3)To determine the amount of previously claimed group relief 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 previously claimed group relief for the overlapping period is the total of the previously claimed 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 a claim by the claimant company for group relief 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.

(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 claimed amount in relation to the prior claim (and ignore Step 3).

  • Step 3

    Determine the previously claimed amount of group relief in relation to the prior claim (see subsection (6)).

(6)To determine the previously claimed amount of group relief 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 given on the prior claim.

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

(7)In this section references to the claimant company's “available total profits” are references to its total profits after the deductions mentioned in section 137(4)(b).

(8)Further, if the claimant company is non-UK resident its available total profits do not include any part of its total profits that arise from activities that are double taxation exempt for the claim period (see section 186) (so far as those profits are not covered by the deductions mentioned in section 137(4)(b)).

(9)For the meaning of “the overlapping period” see section 142.

141Sections 139 and 140: supplementaryU.K.

(1)If two or more claims for group relief are made at the same time, for the purposes of sections 139 and 140 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 purposes of Step 3 in subsection (5) of each of sections 139 and 140 the amount of group relief 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 the proportion mentioned in section 139(2) or (6), or in section 140(2) or (6), 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.

142Meaning of “the overlapping period”U.K.

(1)In sections 139 and 140 “the overlapping period”, in relation to a claim for group relief, means the period that is common to the claim period and the surrender period (see Requirement 2 in section 130(2) or, as the case may be, section 135(2)).

(2)But if during any part of the overlapping period the group 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 group relief condition is the condition on which the claim for group relief is based, that is—

  • the group condition,

  • consortium condition 1,

  • consortium condition 2,

  • consortium condition 3, or

  • the EEA group condition.

Limitations on group relief if claim based on consortium condition 1, 2 or 3U.K.

143Condition 1: surrendering company owned by consortiumU.K.

(1)This section applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 1, and

(b)it is the surrendering company that is owned by the consortium.

(2)The group relief to be given on the claim is limited to the ownership proportion of the surrenderable amount for the overlapping period (see section 139(2) to determine the surrenderable amount for the overlapping period).

(3)The ownership proportion is the same as the lowest of the following proportions—

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

(b)the proportion of any profits available for distribution to equity holders of the surrendering company to which the claimant company is beneficially entitled (see Chapter 6), F158...

(c)the proportion of any assets of the surrendering company available for distribution to such equity holders on a winding up to which the claimant company would be beneficially entitled (see Chapter 6) [F159, and

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

(4)For the purposes of subsection (3)—

(a)the proportions mentioned in [F160paragraphs (a) to (d)] of that subsection are those prevailing during the overlapping period, and

(b)if any of those proportions changes during that period, use the average of that proportion during that period.

(5)If the surrendering company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), references in subsection (3) to the surrendering 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 142.

Textual Amendments

F158Word in s. 143(3)(b) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 7(2)(a)

F159S. 143(3)(d) and word inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 7(2)(b)

F160Words in s. 143(4)(a) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 7(3)

144Condition 1: claimant company owned by consortiumU.K.

(1)This section applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 1, and

(b)it is the claimant company that is owned by the consortium.

(2)The group relief to be given on the claim is limited to the ownership proportion of the claimant company's [F161available total profits] of the overlapping period (see section 140(2) to determine the [F161available total profits] of the overlapping period).

(3)The ownership proportion is the same as the lowest of the following proportions—

(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 (see Chapter 6), F162...

(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 (see Chapter 6) [F163, and

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

(4)For the purposes of subsection (3)—

(a)the proportions mentioned in [F164paragraphs (a) to (d)] of that subsection are those prevailing during the overlapping period, and

(b)if any of those proportions changes during that period, use the average of that proportion during that period.

(5)If the claimant company is owned by the consortium as a result of section 153(3) (consortiums 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 142.

Textual Amendments

F161Words in s. 144(2) substituted (with effect in accordance with art. 1(3) of the amending S.I.) by The Tax Law Rewrite Acts (Amendment) Order 2013 (S.I. 2013/463), arts. 1(2), 10

F162Word in s. 144(3)(b) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 8(2)(a)

F163S. 144(3)(d) and word inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 8(2)(b)

F164Words in s. 144(4)(a) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 8(3)

145Conditions 2 and 3: limitations in sections 143 and 144U.K.

(1)This section applies if the claimant company makes a claim for group relief based on consortium condition 2 or consortium condition 3.

(2)If the claim is based on consortium condition 2, the limitation on group relief in section 143(2) applies in relation to the claim, but for this purpose references in section 143(3) to the claimant company are to be read as references to the link company.

(3)If the claim is based on consortium condition 3, the limitation on group relief in section 144(2) applies in relation to the claim, but for this purpose references in section 144(3) to the surrendering company are to be read as references to the link company.

146Conditions 2 and 3: companies in link company's groupU.K.

(1)If the claimant company makes a claim for group relief based on consortium condition 2, the amount of group 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 that can be given, in total, on consortium claims made by the link company and group companies in relation to the surrendering company's surrenderable amounts for the surrender period.

(3)That limit is the maximum amount of group relief that could be given to the link company in relation to those amounts on consortium claims—

(a)assuming that no consortium claims in relation to those amounts were made by group companies based on consortium condition 2, F165...

[F166(aa) assuming that the link company was UK related, and ]

(b)ignoring any lack of profits of the link company from which deductions could be made as mentioned in section 137(1).

(4)If the claimant company makes a claim for group relief based on consortium condition 3, the amount of group relief to be given on the claim is limited by subsections (5) to (7).

(5)There is a limit on the amount of group relief 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.

(6)That limit is the same as the limit that, as a result of section 144(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[F167, assuming that the link company was UK related].

(7)In determining the limit that would apply as a result of section 144(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.

(8)In this section—

  • consortium claim” means a claim for group relief based on consortium condition 1, consortium condition 2 or consortium condition 3, F168...

  • “group company”, for the purpose of determining in accordance with this section a limitation on the amount of group relief to be given on a claim based on consortium condition 2 or consortium condition 3, means a company that is a member of the same group of companies as the link company (other than the link company itself)[F169, and

  • “UK related”, in relation to a company, has the meaning given by section 134.]

Textual Amendments

F165Word in s. 146(3)(a) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(2)(a)

F166S. 146(3)(aa) inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(2)(b)

F167Words in s. 146(6) inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(3)

F168Word in s. 146(8) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(4)(a)

F169Words in s. 146(8) inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(4)(b)

[F170146A Conditions 1 and 2: surrendering company not controlled by claimant company etc U.K.

(1)This section applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 1,

(b)it is the surrendering company that is owned by the consortium, and

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

(2)This section also applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 2, and

(b)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 surrendering 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 surrendering 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 group relief to be given on the claim is to be determined as if the surrenderable amount for the overlapping period were 50% of what it would be but for this section (see section 139(2) to determine the surrenderable amount for the overlapping period).

(5) In this section “ the overlapping period ” is to be read in accordance with section 142.

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

Textual Amendments

F170Ss. 146A, 146B inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 9

146B Conditions 1 and 3: claimant company not controlled by surrendering company etc U.K.

(1)This section applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 1,

(b)it is the claimant company that is owned by the consortium, 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 for group relief based on consortium condition 3, and

(b)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 group relief to be given on the claim is to be determined as if the claimant company's total profits for the overlapping period were 50% of what they would be but for this section (see section 140(2) to determine the total profits for the overlapping period).

(5) In this section “ the overlapping period ” is to be read in accordance with section 142.

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

Textual Amendments

F170Ss. 146A, 146B inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 9

147Conditions 1 and 2: surrenderable amounts including trading lossU.K.

(1)This section applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 1,

(b)it is the surrendering company that is owned by the consortium,

(c)the surrendering company's surrenderable amounts for the surrender period include a loss within section 99(1)(a), and

(d)the surrendering company has profits (of any description) of that period from which the loss could be deducted under section 37.

(2)This section also applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 2,

(b)the surrendering company's surrenderable amounts for the surrender period include a loss within section 99(1)(a), and

(c)the surrendering company has profits (of any description) of that period from which the loss could be deducted under section 37.

(3)The amount of group relief to be given on the claim is to be determined on the assumption that—

(a)the surrendering company makes a claim under section 37 in relation to the loss mentioned in subsection (1)(c) or (2)(b), and

(b)relief under that section is to be given in relation to the loss before the group relief is given.

(4)If section 148 also applies in relation to the claim for group relief, in giving effect to subsection (3) of this section the surrenderable amounts for the purposes of subsections (3) and (4) of that section are to be reduced by the amount of relief to be given on the surrendering company's claim as mentioned in subsection (3)(b) of this section.

148Conditions 1 and 2: surrendering company in group of companiesU.K.

(1)This section applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 1,

(b)it is the surrendering company that is owned by the consortium, and

(c)the surrendering company is also a member of a group of companies.

(2)This section also applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 2, and

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

[F171(3)In the case of the claim (“the current claim”) the surrendering company’s surrenderable amounts for the surrender period are to be treated as reduced (but not below nil) by the group’s potential relief.]

(5)The group's potential relief is the maximum amount of group relief that could be given if every claim that could be made based on the group condition in respect of the surrenderable amounts was in fact made (and for this purpose it is to be assumed that the maximum possible claim is made in each case).

(6)Before determining the maximum amount of potential group relief under subsection (5), take account of any claim made before the current claim that—

(a)is a claim for group relief based on the group condition, and

(b)is in relation to losses or other amounts surrendered by a member of the same group of companies as the surrendering company (other than the surrendering company itself).

Textual Amendments

F171S. 148(3) substituted for s. 148(3)(4) (with effect in accordance with art. 1(3) of the amending S.I.) by The Tax Law Rewrite Acts (Amendment) Order 2013 (S.I. 2013/463), arts. 1(2), 11

149Conditions 1 and 3: claimant company in group of companiesU.K.

(1)This section applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 1,

(b)it is the claimant company that is owned by the consortium, and

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

(2)This section also applies if—

(a)the claimant company makes a claim for group relief based on consortium condition 3, and

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

[F172(3)In the case of the claim (“the current claim”) the claimant company’s available total profits of the claim period are to be treated as reduced (but not below nil) by the group’s potential relief.]

(5)The group's potential relief is the maximum amount of group relief that could be claimed by the claimant company for the claim period on claims based on the group condition.

(6)Before determining the maximum amount of potential group relief under subsection (5), take account of any claim made before the current claim that—

(a)is a claim for group relief 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 by a company that is also a member of that group.

Textual Amendments

F172S. 149(3) substituted for s. 149(3)(4) (with effect in accordance with art. 1(3) of the amending S.I.) by The Tax Law Rewrite Acts (Amendment) Order 2013 (S.I. 2013/463), arts. 1(2), 12

Chapter 5U.K.Subsidiaries, groups and consortiums

IntroductionU.K.

150Overview of ChapterU.K.

(1)This Chapter explains how to determine if a company—

(a)is a 75% or 90% subsidiary of another company (see section 151),

(b)is a member of a group of companies (see section 152),

(c)is owned by a consortium (see section 153), or

(d)is a member of a consortium (see section 153).

(2)Sections 154 to 156 qualify those explanations in cases involving transfers of companies.

Explanations of termsU.K.

151Meaning of “75% subsidiary” and “90% subsidiary”U.K.

(1)In this Part “75% subsidiary” and “90% subsidiary” are to be read in accordance with Chapter 3 of Part 24, but subject to subsections (2) to (4).

(2)In applying the definition of “75% subsidiary” in section 1154(3), share capital of a [F173registered society ] is to be treated as if it were ordinary share capital.

(3)If—

(a)a company (“the shareholder”) directly owns shares in another company, and

(b)a profit on the sale of those shares would be a trading receipt of the shareholder,

the shareholder is treated as not being the owner of those shares for the purpose of determining if any company is a 75% subsidiary of any other company.

(4)If a company (“the subsidiary”) would, apart from this subsection, be treated as a 75% or 90% subsidiary of another company (“the parent”) at any time, the subsidiary is not to be so treated unless at that time the parent—

(a)is beneficially entitled to at least 75% or 90% (as the case may be) of any profits available for distribution to equity holders of the subsidiary (see Chapter 6), and

(b)would be beneficially entitled to at least 75% or 90% (as the case may be) of any assets of the subsidiary available for distribution to such equity holders on a winding up (see Chapter 6).

Textual Amendments

Modifications etc. (not altering text)

C25S. 151(4) applied (with effect in accordance with Sch. 16 para. 62 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 16 para. 56(3)

152Groups of companiesU.K.

For the purposes of this Part two companies are members of the same group of companies if—

(a)one is the 75% subsidiary of the other, or

(b)both are 75% subsidiaries of a third company.

153Companies owned by consortiums and members of consortiumsU.K.

(1)For the purposes of this Part a company is owned by a consortium if—

(a)the company is not a 75% subsidiary of any company, and

(b)at least 75% of the company's ordinary share capital is beneficially owned by other companies each of which beneficially owns at least 5% of that capital.

(2)The other companies each owning at least 5% of the share capital are the members of the consortium for the purposes of this Part.

(3)If—

(a)a trading company is a 90% subsidiary of a holding company and is not a 75% subsidiary of any company apart from the holding company, and

(b)as a result of subsection (1), the holding company is owned by a consortium,

then for the purposes of this Part the trading company is also owned by the consortium.

Modifications etc. (not altering text)

C26S. 153 applied by 1998 c. 36, Sch. 18 para. 71A(4) (as 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. 116)

Arrangements for transfers of companiesU.K.

154Arrangements for transfer of member of group of companies etcU.K.

(1)This section applies if, apart from this section, one company (“the first company”) and another company (“the second company”) would be members of the same group of companies.

(2)For the purposes of this Part the companies are not members of the same group of companies if—

(a)one of the companies has surrenderable amounts for an accounting period (“the current period”), and

(b)arrangements within subsection (3) are in place.

(3)Arrangements are within this subsection if they have any of the following effects [F174(but see sections [F175155A ] and 155B)].

  • Effect 1

    At some time during or after the current period, the first company or any successor of it—

    (a)

    could cease to be a member of the same group of companies as the second company, and

    (b)

    could become a member of the same group of companies as a third company (see subsection (4)).

  • Effect 2

    At some time during or after the current period a person (other than the first or second company) has or could obtain, or persons together (other than those companies) have or could obtain, control of the first company but not of the second company.

  • Effect 3

    At some time during or after the current period, a third company could start to carry on the whole or a part of a trade that at a time during the current period is carried on by the first company and could do so—

    (a)

    as the successor of the first company, or

    (b)

    as the successor of another company which is not a third company and which started to carry on the whole or a part of the trade during or after the current period.

(4)A “third company” means a company that is not, apart from any arrangements within subsection (3), a member of the same group of companies as the first company.

Textual Amendments

F174Words in s. 154(3) inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(2)

F175Word in s. 154(3) substituted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(2)

155Arrangements for transfer of company owned by consortium etcU.K.

(1)This section applies if, apart from this section, a trading company would be owned by a consortium.

(2)The trading company is not owned by the consortium if—

(a)for an accounting period (“the current period”) the trading company or a member of the consortium has surrenderable amounts, and

(b)arrangements within subsection (3) are in place.

(3)Arrangements are within this subsection if they have any of the following effects [F176(but see sections [F177155A] and 155B)].

  • Effect 1

    The trading company or a successor of it could, at some time during or after the current period, become a 75% subsidiary of a third company (see subsection (4)).

  • Effect 2

    Any person who owns, or any persons who together own, less than 50% of the ordinary share capital of the trading company—

    (a)

    has, or together have, control of the trading company, or

    (b)

    could obtain such control at some time during or after the current period.

  • Effect 3

    Any person (“P”), either alone or together with persons connected with P—

    (a)

    holds or could obtain at least 75% of the qualifying votes, or

    (b)

    controls or could control the exercise of at least 75% of those votes.

    For this purpose—

    • connected” is to be read in accordance with section 1122 but as if subsection (4) of that section were omitted, and

    • qualifying votes” means the votes which may be cast in a poll taken at a general meeting of the trading company held during or after the current period.

  • Effect 4

    A third company could start to carry on the whole or a part of a trade that at a time during the current period is carried on by the trading company and could do so—

    (a)

    as the successor of the trading company, or

    (b)

    as the successor of another company which is not a third company and which started to carry on the whole or a part of the trade during or after the current period.

(4)A “third company” means a company that is not, apart from any arrangements within subsection (3), a member of the same group of companies as the trading company.

(5)If the trading company would, apart from this section, be owned by a consortium as a result of section 153(3) (consortiums involving holding companies)—

(a)references in this section (apart from references under Effect 4) to the trading company are to be read as including references to the holding company concerned, and

(b)Effect 3 does not apply if P is that holding company.

Textual Amendments

F176Words in s. 155(3) inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(3)

F177Word in s. 155(3) substituted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(2)

[F178155ACertain arrangements not within sections 154 and 155U.K.

(1)Arrangements entered into by a joint venture company which, apart from this section, would be arrangements within section 154(3) or 155(3) are not to be treated as such arrangements if and so long as—

(a)the arrangements fall within subsection (2), and

(b)none of the contingencies mentioned in subsection (3) to which the arrangements relate has occurred.

(2)Arrangements fall within this subsection if they are—

(a)an agreement which provides for the transfer of shares or securities in the joint venture company to one or more members of that company on, or as a result of, one or more contingencies mentioned in subsection (3) occurring, or

(b)a provision in a constitutional document of the joint venture company which provides for the suspension of a member’s voting rights on, or as a result of, one or more of those contingencies occurring.

(3)The contingencies referred to in subsections (1)(b) and (2) are—

(a)the voluntary departure of a member,

(b)the commencement of the liquidation, administration, administrative receivership or receivership of, or the entering into of a voluntary arrangement by, a member under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 or the commencement, or entering into, of equivalent proceedings or arrangements under the law of any country or territory outside the United Kingdom,

(c)a serious deterioration in the financial condition of a member,

(d)a change of control of a member,

(e)a default by a member in performing its obligations under any agreement between the members or with the joint venture company (which, for this purpose, includes any constitutional document of the joint venture company),

(f)an external change in the commercial circumstances in which the joint venture company operates such that its viability is threatened,

(g)an unresolved disagreement between members, and

(h)any contingency of a similar kind to that mentioned in any of paragraphs (a) to (g) which is provided for, but not intended to happen, when the arrangements in question are entered into.

(4)This section does not apply if a member could alone or together with connected persons dictate the terms or timing of—

(a)the transfer of shares or securities, or

(b)the suspension of a member’s voting rights,

in advance of one or more of the contingencies occurring.

(5)For the purposes of subsection (4) members are not connected with each other by reason only of their membership of the joint venture company.

(6)In this section—

  • “connected” has the same meaning as in section 1122;

  • “constitutional document” means a memorandum of association, articles of association or any other similar document regulating the affairs of the joint venture company;

  • “joint venture company” means a company which—

    (a)

    has two or more member companies, and

    (b)

    carries on a commercial activity governed by an agreement regulating the affairs of its members;

  • “member” means a holder of shares or securities in the joint venture company.

Textual Amendments

F178Ss. 155A, 155B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(1)

155BCertain mortgage arrangements not within sections 154 and 155U.K.

(1)Arrangements entered into by a company which, apart from this section, would be arrangements within section 154(3) or 155(3) are not to be treated as such arrangements if and so long as—

(a)the arrangements are a mortgage, secured by way of shares or securities in the company, which on default or the happening of any other event allows the mortgagee to exercise its rights against the mortgagor, and

(b)the mortgagee has not exercised its rights against the mortgagor.

(2)This section does not apply if the mortgagee—

(a)possesses greater rights in respect of the shares or securities which are the subject of the mortgage than it requires to protect its interest as mortgagee, or

(b)could alone or together with connected persons dictate the terms or timing of the default or the happening of any other event which allows it to exercise its rights against the mortgagor.

(3)For the purposes of subsection (2)(b) the mortgagee is not, by reason only of the mortgage, connected with a company whose shares or securities are the subject of the mortgage.

(4)In this section—

  • “connected” has the same meaning as in section 1122;

  • “mortgage” means—

    (a)

    in England and Wales, and Northern Ireland, any legal or equitable charge, and

    (b)

    in Scotland, any right in security,

  • (and section 1166(1) (definition of “mortgage”: Scotland) does not apply).]

Textual Amendments

F178Ss. 155A, 155B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(1)

156Sections 154 and 155: supplementaryU.K.

(1)This section applies for the purposes of sections 154 [F179to 155B].

(2)“Arrangements”—

(a)means arrangements of any kind (whether or not in writing), but

(b)does not include [F180]

(i)a power of a Minister of the Crown, the Scottish Ministers or a Northern Ireland department to give directions to a statutory body as to the disposal of assets belonging to the body or to a subsidiary of the body.[F181, or

(ii)a condition or requirement imposed by, or agreed with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body.]

[F182(2A)In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.]

(3)A company is the successor of another company if it carries on a trade which, in whole or in part, the other company used to carry on and the circumstances are such that—

(a)Chapter 1 of Part 22 (transfers of trade without a change of ownership) applies in relation to the companies as, respectively, the successor and the predecessor within the meaning of that Chapter, or

(b)the two companies are connected with each other in accordance with section 1122.

Textual Amendments

F179Words in s. 156(1) substituted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(4)

F180Words in s. 156(2)(b) renumbered as s. 156(2)(b)(i) (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(a)

F181S. 156(2)(b)(ii) and word inserted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(b)

F182S. 156(2A) inserted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(c)

Chapter 6U.K.Equity holders and profits or assets available for distribution

Modifications etc. (not altering text)

C27Pt. 5 Ch. 6 applied (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), ss. 241(6), 381(1) (with Sch. 9 paras. 1-9, 22)

C28Pt. 5 Ch. 6 applied (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), ss. 345(7), 381(1) (with Sch. 9 paras. 1-9, 22, 31)

C29Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 252(10) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 252 (with Sch. 2))

C30Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 170(8) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 242(4) (with Sch. 2))

C31Pt. 5 Ch. 6 applied (with modifications) by Finance Act 2009 (c. 4), s. 772(1)(2) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 646 (with Sch. 2))

C32Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), Sch. 7AC para. 8(2) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 269(3) (with Sch. 2))

C33Pt. 5 Ch. 6 applied by Capital Allowances Act 2001 (c. 2), ss. 212G(5), 212H(2) (as inserted (with effect in accordance with Sch. 4 para. 5, 6 of the amending Act) by 2010 c. 13, Sch. 4 para. 2)

C34Pt. 5 Ch. 6 applied (with modifications) by 2007 c. 3, s. 257BF(3)(4) (as inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 6 para. 1)

C35Pt. 5 Ch. 6 applied by 1992 c. 12, s. 236T(2) (as inserted (with effect in accordance with Sch. 37 paras. 2, 3 of the amending Act) by Finance Act 2014 (c. 26), Sch. 37 para. 1)

C36Pt. 5 Ch. 6 applied by 2007 c. 3, s. 257MV(8) (as inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 1)

C37Pt. 5 Ch. 6 applied by 2010 c. 8, s. 345(7)-(10) (as substituted (with effect in accordance with s. 39(4) of the amending Act) by Finance Act 2014 (c. 26), s. 39(2))

C38Pt. 5 Ch. 6 applied (26.3.2015) by Finance Act 2015 (c. 11), Sch. 16 para. 7(5)

C41Pt. 5 Ch. 6 applied (with modifications) by 1992 c. 12, s. 169S(3D)(3E) (as substituted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 2019 (c. 1), Sch. 16 para. 2(4)

IntroductionU.K.

157Introduction to ChapterU.K.

(1)This Chapter applies for the purposes of sections 143(3)(b) and (c), 144(3)(b) and (c) and 151(4)(a) and (b).

(2)For the purposes of this Chapter—

(a)new consideration” has the meaning given by section 1115, and

(b)all loans are regarded as being securities.

Equity holdersU.K.

158Meaning of “equity holder”U.K.

(1)An equity holder of a company (“the relevant company”) is any person who—

(a)holds ordinary shares in the company (see section 160), or

(b)is a loan creditor of the company in relation to a loan other than a normal commercial loan (see section 162).

(2)For the purposes of subsection (1)(b) a person is a loan creditor of a company if the person is a creditor in respect of any redeemable loan capital issued by the company or in respect of a debt incurred by the company—

(a)for any money borrowed or capital assets acquired by the company,

(b)for any right to receive income created in favour of the company, or

(c)for consideration the value of which to the company was, at the time when the debt was incurred, substantially less than the amount of the debt (including any premium on the debt).

(3)Subsection (1) is subject to section 159.

Modifications etc. (not altering text)

C42S. 158(1)(b) modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 4 (with reg. 8)

159Use of relevant company's assetsU.K.

(1)Subsection (2) applies if—

(a)a person (“P”) has, directly or indirectly, provided new consideration for any shares or securities in the relevant company,

(b)assets of the relevant company are used by P for the purposes of a trade carried on by P or are used by a person connected with P for the purposes of a trade carried on by that connected person, and

(c)in respect of those assets an allowance within subsection (3) has been made to the relevant company.

(2)P (and no other person) is to be treated as being an equity holder in relation to the shares or securities mentioned in subsection (1)(a).

(3)The allowances within this subsection are—

(a)an annual investment allowance, within the meaning of Chapter 5 of Part 2 of CAA 2001, in relation to expenditure incurred by the relevant company on the provision of plant or machinery,

(b)a first-year allowance, within the meaning of that Chapter, in relation to expenditure so incurred,

(c)a writing-down allowance, within the meaning of that Chapter, in relation to expenditure so incurred, and

(d)an allowance under Chapter 3 of Part 6 of CAA 2001 in relation to expenditure incurred by the relevant company on research and development (within the meaning of that Part).

(4)If—

(a)P is a bank,

(b)the only new consideration provided by P is provided in the normal course of banking business by way of a normal commercial loan (see section 162), and

(c)the cost to the relevant company of the assets mentioned in subsection (1)(b) is less than the amount of the new consideration,

the reference in subsection (2) to the shares or securities is to be read as a reference to only so much of that normal commercial loan as is equal to that cost of those assets.

Modifications etc. (not altering text)

C43S. 159(4)(b) modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 4 (with reg. 8)

160Meaning of “ordinary shares”U.K.

(1)For the purposes of section 158(1)(a) “ordinary shares” means shares other than restricted preference shares.

(2)For the purposes of subsection (1) restricted preference shares are shares that meet each of conditions A to E.

(3)Condition A is that the shares are issued for consideration which is or includes new consideration.

(4)Condition B is that the shares do not carry any right to conversion into shares or securities other than a right to conversion into—

(a)shares to which section 164(1) applies,

(b)securities to which section 164(2) applies, or

(c)shares or securities in the relevant company's quoted parent company (see section 164(3) to (7)).

(5)Condition C is that the shares do not carry any right to the acquisition of shares or securities.

(6)Condition D is that the shares—

(a)do not carry a right to dividends, or

(b)carry a restricted right to dividends (see section 161).

(7)Condition E is that the shares, on repayment, do not carry rights to an amount exceeding the new consideration mentioned in subsection (3) except so far as those rights are reasonably comparable with those generally carried by fixed dividend shares listed on a recognised stock exchange.

Modifications etc. (not altering text)

C44S. 160 modified by 1988 c. 1, Sch. 25 para. 2(7A) (as inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 147(2)(b) (with Sch. 2))

C46S. 160(2)-(7) applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

161Meaning of “restricted right to dividends”U.K.

(1)For the purposes of condition D in section 160, a right to dividends carried by shares in a company is a “restricted right to dividends” if—

(a)the dividends represent no more than a reasonable commercial return on the new consideration received by the company in respect of the shares, and

(b)subsection (2), (3) or (4) applies.

(2)This subsection applies if—

(a)the dividends are of a fixed amount or are at a fixed percentage rate of the nominal value of the shares, and

(b)the company is not entitled, by virtue of any term subject to which the shares are issued or held, to reduce the amount of, or not to pay, any of the dividends.

(3)This subsection applies if—

(a)the dividends are of a fluctuating percentage rate of the nominal value of the shares, and

(b)the company is not entitled, by virtue of any term subject to which the shares are issued or held, to reduce the amount of, or not to pay, any of the dividends.

(4)This subsection applies if paragraph (a) of subsection (2) or (3) is met but paragraph (b) of that subsection is not met and—

(a)the company is only entitled to reduce the amount of, or not to pay, any of the dividends in special circumstances, or

(b)having regard to all the circumstances, it is reasonable to assume that the company is only likely to reduce the amount of, or not to pay, any of the dividends in special circumstances.

(5)For the purposes of subsection (3)(a) dividends are of a “fluctuating percentage rate” of the nominal value of shares if the rate fluctuates in accordance with—

(a)a standard published rate of interest,

(b)the retail prices index, or

(c)any other general index of prices similar to the retail prices index that is published by the government, or by an agent of the government, of the country or territory in whose currency the shares are denominated.

(6)For the purposes of subsection (4) a company reduces the amount of, or does not pay, dividends “in special circumstances” if—

(a)at the time the dividend is or would be payable, the company is in severe financial difficulties, or

(b)the company does so for the purpose of following a recommendation of a relevant regulatory body.

(7)The Treasury may by order specify circumstances in which a company is to be treated as in severe financial difficulties for the purposes of subsection (6)(a).

(8)In subsection (6)(b) “relevant regulatory body” means—

[F183(a)in relation to a dividend paid by a company that is a PRA-authorised person for the purposes of the FISMA, the Prudential Regulation Authority,

(aa)in relation to a dividend paid by a company that is authorised for the purposes of the FISMA but does not fall within paragraph (a), the Financial Conduct Authority, and]

(b)in relation to a dividend paid by any other company, a body discharging functions in relation to the company under the law of a country or territory outside the United Kingdom that correspond to functions discharged by the Financial Services Authority in relation to a company authorised as mentioned in paragraph (a).

Textual Amendments

F183S. 161(8)(a)(aa) substituted for s. 161(8)(a) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 18 para. 129(2) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C47Ss. 161-164 applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

162Meaning of “normal commercial loan”U.K.

(1)For the purposes of sections 158(1)(b) and 159(4)(b) “normal commercial loan” means a loan—

(a)which is of or includes new consideration, and

(b)in relation to which each of conditions A to D is met.

[F184(1B)For those purposes, “normal commercial loan” also includes a hybrid capital instrument (within the meaning of section 475C of CTA 2009).]

F185(1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)Condition A is that the loan does not carry any right to conversion into shares or securities other than a right to conversion into—

(a)shares to which section 164(1) applies,

(b)securities to which section 164(2) applies, or

(c)shares or securities in [F186a quoted unconnected company (see section 164(2A)) or in] the relevant company's quoted parent company (see section 164(3) to (7)).

(3)Condition B is that the loan does not carry any right to the acquisition of shares or securities.

(4)Condition C is that the loan does not entitle the loan creditor to any amount by way of interest which—

(a)depends to any extent on the results of the relevant company's business or on the results of any part of that business,

(b)depends to any extent on the value of any of the relevant company's assets, or

(c)exceeds a reasonable commercial return on the new consideration lent.

This subsection needs to be read with section 163.

(5)Condition D is that the loan is a loan in relation to which the loan creditor is entitled, on repayment, to an amount which—

(a)does not exceed the new consideration lent, or

(b)is reasonably comparable with the amount generally repayable (in relation to an equal amount of new consideration) under the terms of issue of securities listed on a recognised stock exchange.

Textual Amendments

F184S. 162(1B) inserted (with effect in accordance with Sch. 20 para. 10(a) of the amending Act) by Finance Act 2019 (c. 1), Sch. 20 para. 6

F185S. 162(1A) repealed (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 12(a)(i)

F186Words in s. 162(2)(c) inserted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(2)

Modifications etc. (not altering text)

C47Ss. 161-164 applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

163Normal commercial loans: company's results or value of assetsU.K.

(1)Interest is not within section 162(4)(a) by reason only that the terms of the loan provide for the rate of interest—

(a)to be reduced if the results of the relevant company's business or any part of the business improve, or

(b)to be increased if such results worsen.

(2)Interest is not within section 162(4)(b) by reason only that the terms of the loan provide for the rate of interest—

(a)to be reduced if the value of any of the relevant company's assets increases, or

(b)to be increased if the value of any such assets decreases.

(3)Subsection (4) applies if—

(a)a loan is made to the relevant company for the purpose of facilitating the acquisition of land,

(b)the loan is made on the basis mentioned in subsection (5), and

(c)none of the land that the loan is used to acquire is acquired with a view to resale at a profit.

(4)Interest on the loan is not within section 162(4)(b) by reason only that the terms of the loan are such that the only way the loan creditor can enforce payment of an amount due is by exercising rights granted by way of security over the land that the loan is used to acquire.

(5)The basis referred to in subsection (3)(b) is that—

(a)the whole of the loan is to be applied in the acquisition of land by the relevant company or in meeting incidental costs incurred wholly and exclusively for the purpose of obtaining the loan or providing security for the loan,

(b)the payment of any amount due in connection with the loan to the person making it is to be secured on the land that the loan is used to acquire, and

(c)no other security is to be required for the payment of any such amount.

(6)Incidental costs” means expenditure on fees, commissions, advertising, printing or other incidental matters.

Modifications etc. (not altering text)

C47Ss. 161-164 applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

164Sections 160 and 162: supplementaryU.K.

(1)This subsection applies to any shares—

(a)in relation to which conditions A, C, D and E in section 160 are met, and

(b)which do not carry any rights to conversion into shares or securities other than rights to conversion into shares or securities in the relevant company's quoted parent company (see subsections (3) to (6)).

(2)This subsection applies to any securities—

(a)which represent a loan of or including new consideration,

(b)in relation to which conditions B, C and D in section 162 are met, and

(c)which do not carry any rights to conversion into shares or securities other than rights to conversion into shares or securities in [F187a quoted unconnected company (see subsection (2A)) or in] the relevant company's quoted parent company.

[F188(2A)For the purposes of this section and section 162 a company is a quoted unconnected company if (and only if)—

(a)its ordinary shares are listed on a recognised stock exchange, and

(b)it is not connected with the relevant company.]

(3)For the purposes of this section and sections 160 and 162 a company (“the candidate company”) is the relevant company's quoted parent company if (and only if)—

(a)the relevant company is a 75% subsidiary of the candidate company,

(b)the candidate company is not a 75% subsidiary of any company, and

(c)the candidate company's ordinary shares are listed on a recognised stock exchange.

(4)[F189In the case of a company whose] ordinary share capital is divided into two or more classes, [F190subsections (2A)(a) and (3)(c) are] met only if its ordinary shares of each class are listed on a recognised stock exchange.

(5)In [F191this section]ordinary shares” means shares forming part of ordinary share capital.

(6)Subsection (7) applies if, in determining under subsection (3)(a) whether the relevant company is a 75% subsidiary of the candidate company, it is necessary to know, for the purposes of subsection (1)(b) or (2)(c) or section 160(4)(c) or 162(2)(c), whether the candidate company is the relevant company's quoted parent company.

(7)It is to be assumed for those purposes that the candidate company is the relevant company's quoted parent company.

Textual Amendments

F187Words in s. 164(2)(c) inserted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(3)

F188S. 164(2A) inserted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(4)

F189Words in s. 164(4) substituted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(5)(a)

F190Words in s. 164(4) substituted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(5)(b)

F191Words in s. 164(5) substituted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(6)

Modifications etc. (not altering text)

C47Ss. 161-164 applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

F192164ALoan forming part of tier two capitalU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F192S. 164A repealed (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 12(a)(ii)

Company's entitlement to profits or assets available for distribution: basic provisionsU.K.

165Proportion of profits available for distribution to which company is entitledU.K.

(1)This section applies for the purpose of determining the proportion to which a company (“company A”) is, at any time, beneficially entitled of any profits available for distribution to the equity holders of another company (“company B”).

(2)The proportion is the proportion to which company A would, at that time, be beneficially entitled on a distribution in money to the equity holders of company B (“the profit distribution”) of—

(a)an amount of profits equal to company B's total profits of the relevant accounting period (see section 168), or

(b)if there are no such total profits, profits of £100.

(3)It does not matter for the purposes of subsection (2) if any of company B's total profits are not actually distributed.

(4)If company B is non-UK resident, company B's total profits are to be calculated as if it were UK resident.

(5)For the purposes of the profit distribution, it is to be assumed that no payment is made by way of repayment of share capital or of the principal secured by any loan unless that payment is a distribution.

(6)Subject to subsection (5), if an equity holder is entitled as such to a payment which (apart from this subsection) would not be a distribution, the equity holder is nevertheless to be treated as entitled to the payment on the profit distribution.

166Proportion of assets available for distribution to which company is entitledU.K.

(1)This section applies for the purpose of determining the proportion to which a company (“company A”) would, at any time, be beneficially entitled of any assets available for distribution to the equity holders of another company (“company B”) on a winding up.

(2)The proportion is the proportion to which company A would, at that time, be beneficially entitled if company B were to be wound up and on that winding up (“the notional winding up”) the value of assets available for distribution to company B's equity holders were equal to—

(a)the assets amount minus the liabilities amount, or

(b)if the assets amount does not exceed the liabilities amount or if company B's balance sheet is prepared to a date other than the end of the relevant accounting period (see section 168), £100.

(3)The “assets amount” is the amount of company B's assets as shown in its balance sheet as at the end of the relevant accounting period.

(4)The “liabilities amount” is the amount of company B's liabilities as shown in that balance sheet but excluding liabilities to equity holders as such.

(5)If, on the notional winding up, an equity holder would be entitled as such to an amount of assets which (apart from this subsection) would not be a distribution of assets, the equity holder is nevertheless treated as entitled to the amount on the distribution of assets on the notional winding up.

(6)Subsection (7) applies if—

(a)an equity holder (“E”) of company B provided new consideration for any shares or securities in company B in relation to which E is an equity holder,

(b)company B makes a loan to E or any person connected with E or acquires shares or securities in E or any person so connected, and

(c)in making that loan or acquiring those shares or securities, company B applies, directly or indirectly, an amount (“the returned amount”) corresponding to the whole or any part of the new consideration.

(7)The following amounts are to be reduced by the returned amount—

(a)the assets amount, and

(b)the amount of assets to which E is beneficially entitled on the notional winding up.

Modifications etc. (not altering text)

C48S. 166 modified by 2007 c. 3, s. 257MV(9) (as inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 1)

167Profits or assets available for distribution and entitlement: supplementaryU.K.

(1)References to profits or assets available for distribution to equity holders of a company do not include references to any profits or assets available for distribution to any equity holder otherwise than as an equity holder.

(2)References to a company being beneficially entitled to profits or assets are references to the company being so entitled—

(a)directly,

(b)through another company or other companies, or

(c)partly directly and partly through another company or other companies.

(3)If a person is an equity holder in relation to shares or securities as a result of section 159, that person (and no other) is to be treated as being beneficially entitled to any distribution of profits or assets attributable to those shares or securities.

168Meaning of “the relevant accounting period”U.K.

(1)For the purpose of determining the proportion of profits or assets to which company A would be beneficially entitled as mentioned in section 165(2) or 166(2) at any time, “the relevant accounting period” is the accounting period of company B in which that time falls.

(2)If company B is non-UK resident and is not within the charge to corporation tax, the relevant accounting period is to be determined using the assumption in subsection (3).

(3)The assumption is that company B became UK resident (and, therefore, within the charge to corporation tax) at the time it became a 75% subsidiary (as mentioned in section 136) ignoring section 151(4).

Company's entitlement to profits or assets available for distribution: supplementaryU.K.

169Application and interpretation of sections 170 to 182U.K.

(1)Sections 170 to 182 apply for the purpose of determining the proportion of profits or assets to which company A would be beneficially entitled as mentioned in section 165(2) or 166(2) at any time.

(2)In those sections—

  • [F193“arrangements”—

    (a)

    means arrangements of any kind (whether or not in writing), but

    (b)

    does not include a condition or requirement imposed by, or agreed with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body,]

  • company A's proportion” means the proportion of profits or assets to which company A would be beneficially entitled as mentioned in section 165(2) or 166(2) at the relevant time,

  • distribution rights” means rights in relation to dividends or interest or assets on a winding up,

  • the participating equity holders”, in relation to the determining of company A's proportion, means the equity holders of company B—

    (a)

    to whom the profit distribution would be made, or

    (b)

    who would be entitled to participate in the notional winding up, and

  • the relevant time” means the time mentioned in subsection (1) when the beneficial entitlement of company A is to be determined.

[F194(3)In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.]

Textual Amendments

F193Words in s. 169(2) substituted (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2014 (c. 26), s. 40(2)(a)

F194S. 169(3) inserted (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2014 (c. 26), s. 40(2)(b)

170Shares or securities with limited rightsU.K.

(1)This section applies if, at the relevant time, one or more of the participating equity holders holds, as such, shares or securities with distribution rights that are limited (wholly or partly) by reference to a specified amount or amounts.

(2)Determine what company A's proportion would be if all those distribution rights were waived so far as they are so limited.

The result is referred to as “the alternative proportion”.

(3)If the alternative proportion is less than what company A's proportion would be ignoring this section, then company A's proportion is taken to be the alternative proportion.

(4)Subsection (3) is subject to sections 175, 176, 178 and 180.

(5)For the purposes of subsection (1) a limitation on a right may operate—

(a)by specifying the capital or amount of profits by reference to which a distribution is calculated, or

(b)in any other way.

(6)But in a case to which section 180 applies (see section 179), limitations that are covered by Case 1 in section 179 are ignored for the purposes of subsection (1).

171Shares or securities with temporary rightsU.K.

(1)Section 172 applies if, at the relevant time, one or more of the participating equity holders holds, as such, shares or securities—

(a)which have rights within subsection (2), or

(b)in relation to which arrangements within subsection (3) are in place.

(2)The rights within this subsection are distribution rights of such a kind that if—

(a)the profit distribution were to be made, or

(b)the notional winding up were to occur,

at a time after the relevant accounting period, the equity holder's entitlement at that time would be different from the equity holder's entitlement at the relevant time.

(3)The arrangements within this subsection are arrangements of such a kind that if—

(a)effect were to be given to the arrangements, and

(b)the profit distribution were to be made, or the notional winding up were to occur, at a time after the relevant accounting period,

then, as a result of effect being given to the arrangements, the equity holder's entitlement at that time would be different from the equity holder's entitlement at the relevant time.

(4)The references in subsections (2) and (3) to the equity holder's entitlement at a time are references to the proportion to which the equity holder would be beneficially entitled (as the case may be)—

(a)of profits on the profit distribution if it were made at that time, or

(b)of assets on the notional winding up if it occurred at that time.

172Company A's proportion if shares etc have temporary rightsU.K.

(1)If this section applies, determine what company A's proportion would be if the rights of all participating equity holders at the relevant time were the same as what they would be at the relevant future time.

The result is referred to as “the alternative proportion”.

(2)For the purposes of subsection (1)—

(a)the relevant future time” means the time after the relevant accounting period mentioned in subsection (2) or (3) of section 171 (as the case may be), and

(b)assume that effect is given to all arrangements (if any) within subsection (3) of that section.

(3)If the alternative proportion is less than what company A's proportion would be ignoring this section, then company A's proportion is taken to be the alternative proportion.

(4)Subsection (3) is subject to sections 175, 177, 178 and 180.

173Cases in which option arrangements are in placeU.K.

(1)Section 174 applies if option arrangements are in place at the relevant time.

(2)Option arrangements” means arrangements in relation to which conditions A and B are met [F195(but see sections 174A and 174B)].

(3)Condition A is that the effect of the arrangements is that there could be a change in—

(a)the proportion of profits to which any of the participating equity holders would be beneficially entitled on the profit distribution if it were made at a time after the relevant time, or

(b)the proportion of assets to which any of the participating equity holders would be beneficially entitled on the notional winding up if it occurred at a time after the relevant time.

(4)Condition B is that, under the arrangements, the change could result from the exercise of—

(a)a right to acquire ordinary shares in company B (see section 160) or securities in company B, or

(b)a right to require a person to acquire such shares or securities.

(5)For the purposes of subsection (4)—

(a)it does not matter whether or not the shares or securities were issued before the arrangements were put in place,

(b)right” does not include a right within subsection (6), and

(c)securities” does not include normal commercial loans (as defined by section 162).

(6)A right is within this subsection if it—

(a)is a right of an individual to acquire shares,

(b)was obtained because of the individual's office or employment as a director or employee of company B, and

(c)was obtained in accordance with a share option scheme at a time when the scheme was an approved share option scheme.

(7)In subsection (6)(c)—

  • share option scheme” means—

    (a)

    an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of ITEPA 2003), or

    (b)

    a CSOP scheme within the meaning of the CSOP code (see section 521(4) of ITEPA 2003), and

  • approved” means—

    (a)

    in relation to an SAYE option scheme, approved under Schedule 3 to ITEPA 2003, and

    (b)

    in relation to a CSOP scheme, approved under Schedule 4 to ITEPA 2003.

Textual Amendments

F195Words in s. 173(2) inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 14(2)

174Company A's proportion if option arrangements in placeU.K.

(1)If this section applies, take the following steps.

  • Step 1

    Identify all option rights under the option arrangements (or sets of arrangements if more than one) which exist at the relevant time but which have not become effective at or before that time.“Option rights” means rights of the kind mentioned in section 173(4)(a) or (b), and such a right becomes “effective” when the shares or securities to which it relates are acquired as a result of its exercise.

  • Step 2

    Identify each possible state of affairs that could subsist at the relevant time if the option rights identified at Step 1, or any of them or any combination of them, became effective at that time. For this purpose it does not matter if an option right cannot actually become effective at or before the relevant time.

  • Step 3

    Take each state of affairs identified at Step 2 and—

    (a)

    identify what the rights and duties of the participating equity holders would be at the relevant time if the state of affairs were to subsist at that time, and

    (b)

    determine what company A's proportion would be if those rights and duties were the rights and duties of the participating equity holders at the relevant time.

  • Step 4

    Identify the lowest proportion determined under paragraph (b) of Step 3. That proportion is referred to as “the alternative proportion”.

(2)If the alternative proportion is less than what company A's proportion would be ignoring this section, then company A's proportion is taken to be the alternative proportion.

(3)Subsection (2) is subject to sections 176 to 178 and 180.

[F196174ACertain option arrangements not within section 173U.K.

(1)Arrangements entered into by a joint venture company which, apart from this section, would be option arrangements within section 173 are not to be treated as such arrangements if and so long as—

(a)the arrangements are within subsection (2), and

(b)none of the contingencies mentioned in subsection (3) to which the arrangements relate has occurred.

(2)Arrangements are within this subsection if they are—

(a)an agreement which provides for the transfer of shares or securities in the joint venture company to one or more members of that company on, or as a result of, one or more contingencies mentioned in subsection (3) occurring, or

(b)a provision in a constitutional document of the joint venture company which provides for the suspension of a member’s voting rights on, or as a result of, one or more of those contingencies occurring.

(3)The contingencies referred to in subsections (1)(b) and (2) are—

(a)the voluntary departure of a member,

(b)the commencement of the liquidation, administration, administrative receivership or receivership of, or the entering into of a voluntary arrangement by, a member under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 or the commencement, or entering into, of equivalent proceedings or arrangements under the law of any country or territory outside the United Kingdom,

(c)a serious deterioration in the financial condition of a member,

(d)a change of control of a member,

(e)a default by a member in performing its obligations under any agreement between the members or with the joint venture company (which, for this purpose, includes any constitutional document of the joint venture company),

(f)an external change in the commercial circumstances in which the joint venture company operates such that its viability is threatened,

(g)an unresolved disagreement between members, and

(h)any contingency of a similar kind to that mentioned in any of paragraphs (a) to (g) which is provided for, but not intended to happen, when the option arrangements in question are entered into.

(4)This section does not apply if a member could alone or together with connected persons dictate the terms or timing of—

(a)the transfer of shares or securities, or

(b)the suspension of a member’s voting rights,

in advance of one or more of the contingencies occurring.

(5)For the purposes of subsection (4) members are not connected with each other by reason only of their membership of the joint venture company.

(6)In this section—

  • “connected” has the same meaning as in section 1122;

  • “constitutional document” means a memorandum of association, articles of association or any other similar document regulating the affairs of the joint venture company;

  • “joint venture company” means a company which—

    (a)

    has two or more member companies, and

    (b)

    carries on a commercial activity governed by an agreement regulating the affairs of its members;

  • “member” means a holder of shares or securities in the joint venture company.

Textual Amendments

F196Ss. 174A, 174B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 14(1)

174BCertain mortgage arrangements not within section 173U.K.

(1)Arrangements entered into by a company which, apart from this section, would be option arrangements within section 173 are not to be treated as such arrangements if and so long as—

(a)the arrangements are a mortgage, secured by way of shares or securities in the company, which on default or the happening of any other event allows the mortgagee to exercise its rights against the mortgagor, and

(b)the mortgagee has not exercised its rights against the mortgagor.

(2)This section does not apply if the mortgagee—

(a)possesses greater rights in respect of the shares or securities which are the subject of the mortgage than it requires to protect its interest as mortgagee, or

(b)could alone or together with connected persons dictate the terms or timing of the default or the happening of any other event which allows it to exercise its rights against the mortgagor.

(3)For the purposes of subsection (2)(b) the mortgagee is not by reason only of the mortgage connected with a company whose shares or securities are the subject of the mortgage.

(4)In this section—

  • “connected” has the same meaning as in section 1122;

  • “mortgage” means—

    (a)

    in England and Wales, and Northern Ireland, any legal or equitable charge, and

    (b)

    in Scotland, any right in security,

  • (and section 1166(1) (definition of “mortgage”: Scotland) does not apply).]

Textual Amendments

F196Ss. 174A, 174B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 14(1)

175Cases in which both sections 170 and 172 applyU.K.

(1)This section applies in a case in which sections 170 and 172 apply but section 174 does not.

(2)Determine what company A's proportion would be—

(a)on the basis mentioned in section 170(2),

(b)on the basis mentioned in section 172(1),

(c)on those bases taken together, and

(d)ignoring sections 170 and 172.

(3)Company A's proportion is taken to be the lowest proportion determined under subsection (2).

176Cases in which both sections 170 and 174 applyU.K.

(1)This section applies in a case in which sections 170 and 174 apply but section 172 does not.

(2)Determine what company A's proportion would be—

(a)on the basis mentioned in section 170(2),

(b)on the basis mentioned at Step 4 in section 174,

(c)on those bases taken together, and

(d)ignoring sections 170 and 174.

(3)Company A's proportion is taken to be the lowest proportion determined under subsection (2).

177Cases in which both sections 172 and 174 applyU.K.

(1)This section applies in a case in which sections 172 and 174 apply but section 170 does not.

(2)Determine what company A's proportion would be—

(a)on the basis mentioned in section 172(1),

(b)on the basis mentioned at Step 4 in section 174,

(c)on those bases taken together, and

(d)ignoring sections 172 and 174.

(3)Company A's proportion is taken to be the lowest proportion determined under subsection (2).

178Cases in which sections 170, 172 and 174 all applyU.K.

(1)This section applies in a case in which sections 170, 172 and 174 all apply.

(2)Determine what company A's proportion would be—

(a)on the basis mentioned in section 170(2),

(b)on the basis mentioned in section 172(1),

(c)on the basis mentioned at Step 4 in section 174,

(d)on the bases mentioned in sections 170(2) and 172(1) taken together,

(e)on the bases mentioned in section 170(2) and at Step 4 in section 174 taken together,

(f)on the bases mentioned in section 172(1) and at Step 4 in section 174 taken together,

(g)on the bases mentioned in section 170(2), section 172(1) and at Step 4 in section 174 taken together, and

(h)ignoring sections 170, 172 and 174.

(3)Company A's proportion is taken to be the lowest proportion determined under subsection (2).

179Cases in which surrendering or claimant company is non-UK residentU.K.

(1)If the surrendering company or the claimant company is non-UK resident at the relevant time, section 180 applies as mentioned in subsections (2) and (3) in the cases set out in subsection (4).

(2)Section 180 applies in the application of this Chapter for the purposes of sections 143(3)(b) and (c) and 144(3)(b) and (c) if the non-UK resident company is owned by the consortium at the relevant time.

(3)Section 180 applies in the application of this Chapter for the purposes of section 151(4)(a) and (b) in determining if the non-UK resident company is a 75% or 90% subsidiary of another company at the relevant time.

But section 180 is not to be applied in determining if the EEA group condition is met (see section 136) at the relevant time.

(4)The cases in which section 180 applies are as follows.

  • Case 1

    One or more of the participating equity holders holds, as such, shares or securities with distribution rights that have effect (wholly or partly) by reference to whether or not, or to what extent, the profits or assets distributed are referable to company B's UK trade (see section 182).

  • Case 2

    Section 174 applies and any of the proportions to be determined under paragraph (b) of Step 3 in that section would differ according to whether or not, or to what extent, the profits or assets distributed are referable to company B's UK trade.

180Company A's proportion if non-UK resident involvedU.K.

(1)If this section applies—

(a)go to subsection (2) if the case is one in which none of sections 170, 172 and 174 applies, and

(b)go to subsection (3) if the case is one in which any of sections 170, 172, and 174 applies.

(2)If the case is as mentioned in subsection (1)(a)—

(a)determine what company A's proportion would be using the assumptions set out in section 181, and

(b)if the proportion so determined (“the alternative proportion”) is less than what company A's proportion would be ignoring this section, then company A's proportion is taken to be the alternative proportion.

(3)If the case is as mentioned in subsection (1)(b), take the following steps.

  • Step 1

    Determine, in each way required by the applicable sections, what company A's proportion would be ignoring this section. A proportion determined at this step is referred to as a “normal proportion”.

  • Step 2

    Determine, in each way required by the applicable sections, what company A's proportion would be using the assumptions set out in section 181. A proportion determined at this step is referred to as a “section 181 proportion”.

  • Step 3

    If a section 181 proportion determined in a required way is less than the normal proportion determined in that way, for the purposes of the applicable sections use the section 181 proportion instead of the normal proportion.

(4)In subsection (3) “the applicable sections” means any of sections 170, 172 and 174 that applies in the case mentioned in subsection (1)(b), together with whichever (if any) of sections 175 to 178 that applies in that case.

181Assumptions to be applied if non-UK resident company involvedU.K.

(1)The assumptions referred to in section 180 are as follows.

  • Assumption 1

    The profit distribution or the distribution on the notional winding up is confined to a distribution of the profits or assets referable to company B's UK trade (see section 182).

  • Assumption 2

    Section 165(2) (in the case of a profit distribution) is applied on the basis that the amount of company B's total profits referred to in that subsection does not exceed the amount of those profits referable to its UK trade.

  • Assumption 3

    Section 166(3) and (4) (in the case of a distribution on a notional winding up) is applied on the basis that the amount of company B's assets and liabilities referred to in those subsections does not exceed the amount of those assets and liabilities referable to its UK trade.

  • Assumption 4

    None of the ordinary equity holders has a beneficial entitlement to the profits or assets referable to company B's UK trade that is greater than the proportion of the distribution in question to which the equity holder would be beneficially entitled—

    (a)

    if Assumptions 1 to 3 were ignored, and

    (b)

    if it would otherwise be less, the distribution were £100.

(2)In subsection (1) “ordinary equity holder” means an equity holder whose beneficial entitlement on the profit distribution or the distribution on the notional winding up does not differ according to whether or not, or the extent to which, the profits or assets distributed are referable to company B's UK trade.

182Assets etc referable to UK tradeU.K.

Profits, assets or liabilities of company B are referable to company B's UK trade so far as they—

(a)are attributable to, or used for the purposes of, activities the income or chargeable gains from which are or (if there were any) would be brought into account in calculating company B's total profits of any accounting period, and

(b)are not attributable to, or used for the purposes of, activities which are double taxation exempt for any accounting period (see section 186).

Chapter 7U.K.Miscellaneous provisions and interpretation of Part

MiscellaneousU.K.

183Payments for group reliefU.K.

(1)This section applies if—

(a)the surrendering company and the claimant company have an agreement between them in relation to losses and other amounts of the surrendering company (“the agreed loss amounts”),

(b)group relief is given to the claimant company in relation to the agreed loss amounts, and

(c)as a result of the agreement the claimant company makes a payment to the surrendering company that does not exceed the total amount of the agreed loss amounts.

(2)The payment—

(a)is not to be taken into account in determining the profits or losses of either company for corporation tax purposes, and

(b)for corporation tax purposes is not to be regarded as a distribution.

184References to “allowance” in CAA 2001U.K.

References in CAA 2001 (apart from Parts 6 and 10) to an allowance include references to an allowance which would be made—

(a)but for the giving of group relief, or

(b)but for that and for a lack of profits or other income.

InterpretationU.K.

185“Trading company” and “holding company”U.K.

(1)In this Part “trading company” means a company the business of which consists wholly or mainly in the carrying on of a trade or trades.

(2)In this Part “holding company” means a company the business of which consists wholly or mainly in the holding of shares or securities of companies that—

(a)are its 90% subsidiaries (see section 151), and

(b)are trading companies.

186When activities of a company are double taxation exemptU.K.

(1)For the purposes of this Part activities of a company are double taxation exempt for an accounting period if, because of double taxation arrangements, the income and chargeable gains (if any) arising for that period from the activities are to be ignored in determining the company's chargeable profits for that period.

(2)In determining if any activities are double taxation exempt, assume that any claim that must be made before effect is given to any provision of double taxation arrangements is made.

(3)Double taxation arrangements” means arrangements which have effect under section 2(1) of TIOPA 2010 (double taxation relief by agreement with territories outside the United Kingdom).

187“Non-UK tax”U.K.

(1)In this Part “non-UK tax” means a tax chargeable under the law of a territory outside the United Kingdom which—

(a)is charged on income and corresponds to United Kingdom income tax, or

(b)is charged on income or chargeable gains or both and corresponds to United Kingdom corporation tax.

(2)A tax is not outside the scope of subsection (1) by reason only that it—

(a)is chargeable under the law of a province, state or other part of a country, or

(b)is levied by or on behalf of a municipality or other local body.

188Other definitionsU.K.

(1)In this Part—

  • the claimant company ” has the meaning given by section 130(2) or 135(2) (as the case may be),

  • the claim period” has the meaning given by section 130(2) or 135(2) (as the case may be),

  • company” means any body corporate[F197(except in [F198sections 156(2A) and 169(3)]] ,

  • group relief” has the meaning given by section 97(2),

  • profits” means income and chargeable gains, except in so far as the context otherwise requires,

  • the surrenderable amounts” has the meaning given by section 99(7) or 113(5) (as the case may be),

  • surrendering company” has the meaning given by section 99(7) or 113(5) (as the case may be), and

  • the surrender period” has the meaning given by section 99(7) or 113(5) (as the case may be).

(2)In this Part, except in so far as the context otherwise requires—

(a)references to a trade include an office, and

(b)references to carrying on a trade include holding an office.

Textual Amendments

F197Words in s. 188(1) inserted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(3)

F198Words in s. 188(1) substituted (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2014 (c. 26), s. 40(3)

[F199PART 5AU.K.Group relief for carried-forward losses

Textual Amendments

F199Pt. 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

CHAPTER 1U.K.Introduction

188AAIntroduction to PartU.K.

(1)This Part—

(a)allows a company to surrender losses and other amounts that have been carried forward to an accounting period of the company (see Chapter 2), and

(b)enables, in certain cases involving groups or consortiums of companies, other companies to claim corporation tax relief for the losses and other amounts that are surrendered (see Chapter 3).

(2)Chapters 4 and 5 contain limitations on the amount of corporation tax relief which may be given on a claim under Chapter 3.

(3)See Chapter 5 for definitions that apply for the purposes of this Part and miscellaneous provisions.

(4)The corporation tax relief mentioned in this section is called “group relief for carried-forward losses.

CHAPTER 2U.K.Surrender of company's carried-forward losses etc

188BAOverview of ChapterU.K.

(1)This Chapter allows a company to surrender losses and other amounts that have been carried forward to an accounting period of the company.

(2)Section 188BB sets out the basic provisions about the surrendering of losses and other amounts.

(3)Sections 188BC to 188BJ place restrictions on the surrendering of losses and other amounts.

188BBSurrender of carried-forward losses and other amountsU.K.

(1)Subsection (2) applies if—

(a)a loss or other amount is carried forward to an accounting period of a company under any of the following provisions—

(i)section 463G(6) of CTA 2009 (carry forward of post-1 April 2017 non-trading deficit from loan relationships);

(ii)section 753(3) of that Act (carry forward of non-trading loss on intangible fixed assets);

(iii)section 1223 of that Act (carry forward of expenses of management of investment business);

(iv)section 45A(4) of this Act (carry forward of post-1 April 2017 trade loss);

(v)sections 62(5)(a) and 63(3)(a) of this Act (carry forward of loss made in UK property business); or

(b)section 303C of this Act (excess carried forward non-decommissioning losses of ring fence trade: relief against total profits) applies in relation to an amount.

(2)The company may surrender the loss or other amount under this Chapter so far as the loss or other amount is eligible for corporation tax relief (apart from this Part).

(3)Subsection (4) applies if any of a BLAGAB trade loss made by an insurance company for an accounting period is carried forward to an accounting period of the company (“the later period”) under section 124A(2) or 124C(3) of FA 2012.

(4)The company may surrender the remaining carried forward amount under this Chapter so far as that amount is eligible for corporation tax relief (apart from this Part).

(5)In subsection (4) “the remaining carried forward amount” means so much of the amount carried forward (as mentioned in subsection (3)) as cannot be deducted under section 124A(5) or 124C(6) of FA 2012 from the company's BLAGAB trade profit (if any) of the later period.

(6)Under paragraph 70(1) of Schedule 18 to FA 1998, the company surrenders losses or other amounts, so far as eligible for surrender under this Chapter, by consenting to one or more claims for group relief for carried-forward losses in relation to the amounts (see requirement 1 in section 188CB(3) and requirement 1 in section 188CC(3)).

(7)In this Part, in relation to losses or other amounts within subsection (1) or (4) that a company has carried forward to an accounting period—

  • the surrenderable amounts” means those losses and other amounts so far as eligible for surrender under this Chapter,

  • surrendering company” means the company that has the losses or other amounts,

  • the surrender period” means the accounting period to which the losses and other amounts have been carried forward.

(8)See sections 188BC to 188BJ for provisions restricting what the surrendering company may surrender under this section.

188BCRestriction on surrendering pre-1 April 2017 losses etcU.K.

(1)The surrendering company may not surrender under this Chapter—

(a)a loss carried forward to the surrender period under section 753(3) of CTA 2009 in so far as the loss is made up of an amount previously carried forward under that section from an accounting period beginning before 1 April 2017,

(b)expenses carried forward to the surrender period under section 1223 of CTA 2009 if the expenses were first deductible under section 1219 of that Act for an accounting period beginning before that date, or

(c)a loss carried forward to the surrender period under section 62(5)(a) or 63(3)(a) of this Act if the loss was made in an accounting period beginning before that date.

(2)The surrendering company may not surrender under this Chapter a qualifying charitable donation carried forward to the surrender period under section 1223 of CTA 2009.

188BDRestriction where investment business has become small or negligibleU.K.

(1)The surrendering company may not surrender under this Chapter—

(a)a loss carried forward to the surrender period under section 753(3) of CTA 2009 if an investment business carried on by the surrendering company became small or negligible before the beginning of that period,

(b)expenses carried forward to the surrender period under section 1223 of CTA 2009 if the surrendering company's investment business became small or negligible before the beginning of that period, or

(c)a loss carried forward to the surrender period under section 62(5)(a) or 63(3)(a) if the surrendering company's investment business became small or negligible before the beginning of that period.

(2)In this section—

(a)company with investment business” has the same meaning as in Part 16 of CTA 2009 (see section 1218B of that Act);

(b)references to a company's investment business are to be construed in accordance with section 1219(2) of CTA 2009.

188BERestriction where surrendering company could use losses etc itselfU.K.

The surrendering company may not surrender any losses or other amounts under this Chapter if—

(a)section 269ZD(2) applies in determining the taxable total profits of the surrendering company for the surrender period, and

(b)the sum of the relevant deductions (within the meaning of section 269ZD(3)) made for the surrender period is less than the maximum permitted by section 269ZD(2).

188BFRestriction where surrendering company has no income-generating assetsU.K.

The surrendering company may not surrender any losses or other amounts under this Chapter if at the end of the surrender period the surrendering company has no assets capable of producing income.

188BGRestrictions for certain insurance companiesU.K.

(1)If the surrendering company is a general insurance company and the surrender period is an excluded accounting period, the company may not surrender under this Chapter—

(a)a loss carried forward to the surrender period under section 753(3) of CTA 2009;

(b)expenses carried forward to the surrender period under section 1223 of CTA 2009;

(c)a loss carried forward to the surrender period under section 62(5)(a) or 63(3)(a).

(2)In subsection (1) “excluded accounting period” and “general insurance company” are to be interpreted in accordance with section 269ZG.

(3)If the surrendering company is a Solvency 2 insurance company it may not surrender under this Chapter—

(a)a loss carried forward to the surrender period under section 753(3) of CTA 2009,

(b)expenses carried forward to the surrender period under section 1223 of CTA 2009, F200...

(c)a loss carried forward to the surrender period under section 62(5)(a) or 63(3)(a), [F201or

(d)a BLAGAB trade loss carried forward to the surrender period under section 124A(2) or 124C(3) of FA 2012,]

so far as the loss is, or (as the case may be) the expenses are, a shock loss.

Textual Amendments

F200Word in s. 188B(3)(b) 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. 23(a)

F201S. 188B(3)(d) and word inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 23(b)

188BHRestriction on surrender of losses etc made when UK residentU.K.

(1)This section applies in relation to a loss or other amount carried forward to the surrender period if the surrendering company was UK resident during the loss-making period.

(2)The surrendering company may not surrender the loss or other amount under this Chapter so far as the loss or other amount—

(a)is attributable to a permanent establishment through which the company carried on a trade outside the United Kingdom during the loss-making period (see subsection (3)), and

(b)is, or represents, an amount within subsection (5).

(3)A loss or other amount is attributable to a permanent establishment of the surrendering company if (ignoring this section) the amount could be included in the company's surrenderable amounts for the surrender period if those amounts were determined—

(a)by reference to that establishment alone, and

(b)by applying, in relation to that establishment, principles corresponding in all material respects to those mentioned in subsection (4).

(4)The principles are those that would be applied for corporation tax purposes in determining an equivalent loss or other amount in the case of a permanent establishment through which a non-UK resident company carried on a trade in the United Kingdom.

(5)An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of the territory in which the permanent establishment was situated, the amount is or at any time has been (in any period) deductible from or otherwise allowable against non-UK profits of a person other than the surrendering company.

(6)Subsection (7) applies for the purposes of subsection (5) if, in order to determine if an amount is or at any time has been deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is or has been deductible or otherwise allowable for tax purposes in the United Kingdom.

(7)The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned if (and only if) the surrendering company is treated as resident in that territory for the purposes of the non-UK tax.

(8)In this section and section 188BI—

  • the loss-making period”, in relation to a loss or other amount, means the accounting period in which the loss was made or the amount arose,

  • non-UK tax” has the meaning it has in Part 5 (see section 187), and

  • non-UK profits” has the meaning given by section 108.

188BIRestriction on surrender of losses made when non-UK residentU.K.

(1)This section applies in relation to a loss or other amount carried forward to the surrender period if during the loss-making period the surrendering company was a non-UK resident [F202company within the charge to corporation tax].

(2)If the surrendering company was established in the EEA during the loss-making period, it may surrender the loss or other amount under this Chapter only so far as conditions A and B are met.

Subsection (8) imposes restrictions on a surrender under this subsection.

(3)In any other case, the surrendering company may surrender the loss or other amount under this Chapter only so far as conditions A, B and C are met in relation to the loss or amount.

(4)Condition A is that the loss or other amount is attributable to activities of the surrendering company in respect of which it is within the charge to corporation tax for the loss-making period.

(5)Condition B is that the loss or other amount is not attributable to activities of the surrendering company that are double taxation exempt for the loss-making period (within the meaning given by section 186).

(6)Condition C is that—

(a)the loss or other amount does not correspond to, and is not represented in, an amount with subsection (7), and

(b)no amount brought into account in calculating the loss or other amount corresponds to, or is represented in, an amount within subsection (7).

(7)An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of a territory, the amount is or at any time has been (in any period) deductible from or otherwise allowable against non-UK profits of any person.

(8)A loss or other amount may not be surrendered by virtue of subsection (2) if and to the extent that it, or any amount brought into account in calculating it, corresponds to, or is represented in, amounts within subsection (9).

(9)An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of a territory, the amount has (in any period) been deducted from or otherwise allowed against non-UK profits of any person.

(10)But an amount is not to be taken to be within subsection (7) or (9) by reason only that it is—

(a)an amount of profits brought into account for the purpose of being excluded from non-UK profits of the person, or

(b)an amount brought into account in calculating an amount of profits brought into account as mentioned in paragraph (a).

(11)Subsection (12) applies for the purposes of subsection (7) if, in order to determine if an amount is or at any time has been deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is or at any time has been deductible or otherwise allowable for tax purposes in the United Kingdom.

(12)The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned.

(13)For the purposes of this section a company is established in the EEA if—

(a)it is constituted under the law of the United Kingdom or an EEA territory, and

(b)it has its registered office, central administration or principal place of business within the European Economic Area.

(14)In subsection (13) “EEA territory”, in relation to any time, means a territory outside the United Kingdom that is within the European Economic Area at that time.

Textual Amendments

F202Words in s. 188BI(1) substituted (6.4.2020) by Finance Act 2019 (c. 1), Sch. 5 paras. 31, 35 (with Sch. 5 para. 36)

188BJRestriction on surrender losses etc made when dual residentU.K.

The surrendering company may not surrender a loss or other amount under this Chapter if the company was not eligible to surrender the loss or other amount under Chapter 2 of Part 5 by reason of section 109 (restriction on losses etc surrenderable by dual resident).

CHAPTER 3U.K.Claims for group relief for carried-forward losses

IntroductionU.K.

188CAOverview of ChapterU.K.

This Chapter sets out how a company may claim group relief for carried-forward losses and how the relief is given.

Claiming group relief for carried-forward lossesU.K.

188CBClaims in relation to all the surrenderable amountsU.K.

(1)This section applies in relation to the surrendering company's surrenderable amounts for the surrender period under Chapter 2.

(2)If the requirements in subsection (3) are met, a company (“the claimant company”) may make a claim for group relief for carried-forward losses for an accounting period (“the claim period”) in relation to the surrenderable amounts.

(3)The requirements are as follows—

  • Requirement 1 The surrendering company consents to the claim.

  • Requirement 2 There is a period (“the overlapping period”) that is common to the claim period and the surrender period.

  • Requirement 3 At a time during the overlapping period—

    (a)

    the group condition is met (see section 188CE)

    (b)

    consortium condition 1 is met (see section 188CF), or

    (c)

    consortium condition 2 is met (see section 188CG).

(4)A claim under this section may relate to the whole of the surrenderable amounts or to part of them only.

(5)This section is subject to section 188CD (claim not allowed by company with unused carried-forward losses of its own).

Modifications etc. (not altering text)

C49S. 188CB(3) applied (with effect in accordance with Sch. 4 para. 190 of the amending Act) by 1998 c. 36, Sch. 18 para. 70(1) (as substituted) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 114(2)

188CCClaims in relation to the surrenderable amounts that are attributable to a specified accounting periodU.K.

(1)This section applies in relation to the surrendering company's surrenderable amounts for the surrender period under Chapter 2.

(2)If the requirements in subsection (3) are met, a company (“the claimant company”) may make a claim for group relief for carried-forward losses for an accounting period (“the claim period”) in relation to the surrenderable amounts that are attributable to an accounting period of the surrendering company specified in the claim (“the specified