Ch 21: Groups of companies

Question 1

Where does a relief group/ loss group exist?

Answer 1

• One company owns at least 75% of the ordinary share capital of the other. 75% Indirect holdings are taken into account
• Foreign co’s can provide a link (can’t be in the group)

Question 2

What is the rule around brought forward losses for group companies?

Answer 2

You have to use the brought forward loss in your own company first (against profits)

Question 3

What is the maximum group relief?

Answer 3

The LOWER of:

• Company A’s loss
• Company B’s TTP for the same period

Question 4

What is the deadline to claim group relief?

Answer 4

2 years from the end of the claiming company’s accounting period

Question 5

What is the loss rule if a subsidiary joins the group mid way through an accounting period?

Answer 5

The loss can be surrendered for the period of ownership only i.e. time apportion (when ‘arrangements’ are in place - the earlier date in relation to leaving)

Question 6

What if A and B have different year ends?

Answer 6

time apportion to calculate the profits arising in the same period

Question 7

What happens to b/f losses of the Co’ before joining the group if the group joined after 1st April 2017?

Answer 7

Loss just stays in company for 5 years - no group relief

Question 8

What is the consortium criteria?

Answer 8

• > 75% of its share capital is owned by consortium members
• each of whom own >5% and <75%
• consortium members must be companies, UK or overseas

Question 9

What is the impact of being a consortium company (ConCo)?

Answer 9

If ConCo makes a loss, you can take your share of the loss as long as it can be used

Question 10

What is the maximum relief if a ConCo makes a loss?

Answer 10

The LOWER of:

• the consortium members % share of ConCos trading loss
• consortium members TTP

Question 11

What is the maximum relief if a consortium member makes a loss?

Answer 11

The LOWER of:

• the consortium members % share of ConCos TTP
• consortium members trading loss

Question 12

When does a gains group exist?

Answer 12

If there are >75% links between two or more companies
The HoldCo has >50% (indirectly) of any subs
- Overseas groups can link, but can’t be in it

Question 13

How many gains groups can you be in?

Answer 13

Only one

Question 14

What are the benefits of being in a gains group?

Answer 14

1. Nil gain Nil loss transfers; base cost = original cost + IA to the transfer date
2. Transfer current year capital gains/ losses
3. Group rollover relief

Question 15

What happens to pre-entry gains and losses?

Answer 15

They are kept in the original company:
Pre-entry losses can’t be used vs. gains transferred from group co’s
Pre-entry gains can’t be used against losses transferred from group co’s

Question 16

When will a degrouping charge apply?

Answer 16

When BOTH of the following conditions are satisfied:

1. A company leaves a gains group <6years of receiving an asset in a NGNL transfer
2. It still owns the asset at the date it leaves the group

Question 17

What is the degrouping charge amount?

Answer 17

It equals the gain that would have arisen if the asset was sold to a third party at MV on the date of the original transfer:
Proceeds (MV)                 x
Cost                                 (x)
IA to the transfer date    (x)
= DGC

Question 18

What happens to the DGC if the company leaves the group as a result of selling shares?

Answer 18

The DGC is added to the share sales proceeds

*If SSE applies then gain and DGC is exempt