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TC > 20. TC - Groups > Flashcards

20. TC - Groups Flashcards

1
Q

Who is group loss relief available to?

A

Available to members of a 75% group

You need a ‘strict’ 75% group where the direct and indirect holding must be at least 75%

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2
Q

When are companies members of a 75% group?

A

Where

  • One company is the 75% subsidiary of the other
  • Both companies are 75% subsidiaries of a third companies
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3
Q

Can a company be a member of more than one loss group?

A

YES

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4
Q

Can group loss relief be claimed with overseas companies?

A

Yes, group relief allows groups to be created through companies resident anywhere in the world

The companies claiming/surrendering group relieff must be UK resident

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5
Q

Describe the mechanics of group relief

A

Companies which form part of the same group relief group can transfer losses

Only brought forward and current period losses can be surrendered
Losses carried back can’t be surrendered

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6
Q

Which losses can be surrendered in group relief?

A

Only brought forward and current period losses can be surrendered
Losses carried back can’t be surrendered

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7
Q

What is a surrendering company?

A

A company that surrenders its loss

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8
Q

What is the claimant company?

A

The company to which the loss is surrendered

As the claim for group relief is made on the corporation tax return of the recipient of the loss

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9
Q

Why is the company which the loss is surrendered to called the claimant company?

A

As the claim for group relief is made on the corporation tax return of the recipient of the loss

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10
Q

Does the surrendering company need to give consent to the claimant company?

A

Yes

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11
Q

What is the deadline for the claim for group relief?

A

2 years of the end of the relevant

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12
Q

What is the exam technique for dealing with group reliefs?

A
  1. Determine which companies are in the loss relief and chargeable gains groups
  2. Set up a pro forma corporation tax computation for each company side by side and leave spaces for the loss set off to be inserted
  3. Set up a loss memo working for each loss to show how it is utilised
  4. If there is more than one loss consider any capital losses first
  5. Set off losses according to the requirement of the question
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13
Q

What current period losses is group relief available for?

A
  • Trading income losses
  • Excess property loss
  • NTLR deficits
  • Excess QCDs
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14
Q

What amounts can be surrendered for property losses and QCDs?

A

Only amounts in excess of total profits (before loss relief)

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15
Q

What amount can be surrendered for property losses and QCDs when considering group relief?

A

Only amounts in excess of total profits (before loss relief) can be surrendere

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16
Q

What is the maximum that group relief of current period losses can be?

A

The lower of

  • The available loss of the surrendering company
  • The available profits of the claimant company
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17
Q

How are the available profits of a claimant company for group relief calculated?

A

TTP X
Less: b/f trading losses (full amount) (X)
Less CY trading losses (deemed claim) (X)
Less b/f NTLR deficits (automatic) (X)
Less CY NTLR deficits (only if actual claim made) (X)

Max loss relief in claimant company X

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18
Q

How does carried back trading losses affect the amount that can be claimed as group relief?

A

Doesn’t affect the maximum that can be claimed as group relief

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19
Q

How does carried back NTLR deficits affect the amount that can be claimed as group relief?

A

Doesn’t affect the maximum that can be claimed as group relief

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20
Q

How does claimant companies of group relief offset the surrendered loss?

A

Offsets the surrendered loss after bfwd and current period losses but BEFORE relief for losses carried back from later periods

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21
Q

What is group relief offset against?

A

Offset against TTP

Unlike a single company claim which are offset taint total profits

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22
Q

What is the difference between group relief claims and single company claims?

A

Groups offset against TTP

Unlike a single company claim which are offset taint total profits

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23
Q

What is the downside of group claims?

A

It is usual for the claimant company to pay for group relief
Especially where minority interests are involved

Such payments, up to a max of £1 for every £1 of loss surrendered are ignored for tax purposes

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24
Q

How is the cost of group relief dealt with in tax?

A

Such payments, up to a max of £1 for every £1 of loss surrendered are ignored for tax purposes

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25
Q

What brought forward losses are available for group relief for the surrendering company?

A
  • Trading income losses
  • Excess property loss
  • NTLR deficits

Bfwd losses may ONLY be group relived if they can’t be used against the surrendering company’s own total profits

26
Q

When can bfwd losses be used for group relief for the surrendering company?

A

Bfwd losses may ONLY be group relived if they can’t be used against the surrendering company’s own total profits

27
Q

When can group relief for brought forward losses of another company be claimed?

A

May only be claimed if the claimant company has no unused bfwd losses of its own

28
Q

What is the maximum amount of claim that can be claimed from brought forward losses of the claimant company?

A

The max amount claimed is the lower of

  • Available loss of the surrendering company
  • Its available profits of the claimant company
29
Q

What is the annual deductions allowance for group relief?

A

£5m plus 50% of the excess profits over this amount

The £5m allowance is shared between the companies in the loss relief group
The nominates company submits a group allowance statement for each acc period

30
Q

How is the deductions allowance allocated in a loss relief group? and how is the deduction made?

A

The £5m allowance is shared between the companies in the loss relief group
The nominates company submits a group allowance statement for each acc period

31
Q

What must exist for there to be a chargeable gains group?

A

There must be a direct holding of at least 75% but the indirect holding of the principal company need only be greater than 50% groups

Subsidiaries can’t be a member of more than 1 gains group

32
Q

Can subsidiaries be a member of more than one gains group?

A

NO

33
Q

Can non-resident companies be part of gains group?

A

Non-UK resident companies can act as links but can’t participate in the gains group

34
Q

What are the advantages of being in a gains group?

A
  • Assets are transferred within the group at no gain/no loss (NGNL), but degrouping charges may apply
  • Gains and losses may be re-allocated around the group
  • The reinvestment of proceeds for rollover relief purposes may be made by any group member
35
Q

What is the potential disadvantage of gains groups?

A
  • Assets are transferred within the group at no gain/no loss (NGNL), but degrouping charges may apply
36
Q

What is NGNL?

A

No gain no loss

37
Q

What is NGNL?

A

No gain no loss

38
Q

When do NGNL transfers occur?

A

When chargeable assets are automatically transferred between group comapnies

39
Q

How does a transfer between group companies of chargeable assets work?

A

They are automatically

40
Q

When do NGNL transfers occur?

A

When chargeable assets are automatically transferred between group companies

41
Q

How does a transfer between group companies of chargeable assets work?

A

They are automatically transferred between group companies

Any actual proceeds received are ignored and the deemed proceeds for the transferor, and the deemed cost for the recipient, are equal to cost + indexation up to the transferor

42
Q

How does a transfer between group companies end up being NGNL?

A

Any actual proceeds received are ignored and the deemed proceeds for the transferor, and the deemed cost for the recipient, are equal to cost + indexation up to the transferor

43
Q

How is it dealt with if an asset the has been transferred within the group and is then subsequently sold?

A

If the receipient later sells it outside the group the deemed cost is indexed from the date of transfer up to the date of disposal

Proceeds X
Cost (original cost + IA to date of NGNL transfer/ Dec 17) (X)
IA (from fate of NGNL transfer to date of disposal/ Dec 17) (X)
Gain/loss X/(X)

44
Q

How is a gain calculated for when a recipient of an internally transferred subsequently sells the asset after?

A

Proceeds X
Cost (original cost + IA to date of NGNL transfer/ Dec 17) (X)
IA (from fate of NGNL transfer to date of disposal/ Dec 17) (X)
Gain/loss X/(X)

45
Q

When does a degrouping charge arise?

A

When

  • A company leaves a gains group
  • Still owning an asset received via NGNL from another company in that gains group
  • Within 6 years of the NGNL
46
Q

How is a regrouping charge calculated?

A

Charge is the gain that would have arisen at the date of the NGNL transfer if the asset had been sold outside the gains group:

Proceeds (MV at date of NGNL transfer) X
Cost to transferor (X)
IA (from date of purchase to date of NGNL transfer/ Dec 17) (X)

Degrouping charge X

47
Q

How does the future disposal of an asset that has previously been subjected to degrouping charges?

A

For any future disposal of the asset, the departing company will then be treated as having a base cost equivalent to the mV on the date of the original transfer

48
Q

When do you assume for the exam that a degrouping charge arises?

A

Arises due to the disposal of shares of the departing company (a qualifying share disposal)

49
Q

How is a degrouping charge taxed?

A
  • A degrouping gain is added to sale proceeds received on the disposal of the shares
  • A degrouping loss is added to the allowable cost of the disposal of the shares
50
Q

What is the effect of a degrouping charge?

A

The effect is that if the disposal of shares qualifies for the SSE, then the charge will be exempt too (or a degrouping loss would not be allowable)

51
Q

How do you deal with a regrouping charge in the exam if you are asked to calc the total proceeds on disposals for gain purposes?

A

This could involve a regrouping charge
Even if the degrouping charge is exempt as a result of SSE, the base cost of the asset will still be uplifted to its value at the time of the NGNL transfer

52
Q

What does SSE stand for?

A

Substantial shareholding exemption (SSE)

53
Q

Does SSE apply to NGNL transfers of shares within a gains group?

A

Doesn’t apply no

54
Q

What is the ownership period for the purposes of subsequent disposals of shares outside the group?

A

It is from the date of acquisition by the first gains group member

55
Q

How do you determine the 10% threshold for a company is a member of a group (>50% holding) for the purposes of SSE?

A

For the purposes of SSE, the total number of shares held by group members is used when considering whether the 10% threshold has been met

56
Q

How can you re-allocate gains/losses to other group companies?

A

A joint election can be made to reallocate all/part of a CY gain or capital loss made y one group company to another group company is order to make use of capital losses

57
Q

What is an election available for for the reallocation of gains or losses to other group companies?

A

Available for actual or deemed disposals (e.g. if SSE doesn’t apply a regrouping charge may be reallocated in the group)

58
Q

What is the deadline for an election for the reallocation of gains or losses to other groups?

A

Election must be made within 2 years of the end the acc period in which the actual disposal was made

59
Q

How does roll over relief work for groups?

A

For the purposes of rollover relief, a gains group is treated as a single trade

60
Q

How does group rollover relief work?

A

For the purposes of rollover relief, a gains group is treated as a single trade

This means that a gain on the disposal of a qualifying asset in one group company can be rolled over against the purchase of qualifying assets, within the permitted time period, by another group member

61
Q

What assets qualify for rollover relief for a company?

A
  • L&B (freehold and leasehold) occupied and used for trading purposes
  • Fixed P&M (not movable) used for trading purposes
62
Q

Are degrouping charges subject to rollover relief claims if SSE doesn’t apply?

A

NO they can’t be subject to a rollover relief

TC (25 decks)

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