Corporate groups and consortia Flashcards
How is the annual investment allowance treated with regards to groups?
The group gets 1 annual investment allowance to split between them and they can share that Annual investment allowance however they see fit. For example they may choose to allocate more of the annual investment allowance to a company with more special rate pool assets as it more tax efficient.
What are the 4 types of groups?
Common control group where AIA can be shared
75% group for group loss relief.
Consortia. (More than 1 corporate owner of companies)
75% group for capital gains.
What are the benefits of AIA allocation in groups?
AIA can be added to companies with special rate pool items to increase the writing down allowance form 6% to 100%
AIA can be used to reduce profits which can change a company from a large to a small company which means the corporation tax can be paid in 9 month and 1 day instead of quarterly.
What is the purpose of a group loss relief group question?
To identify which companies are in the group and to allocate the losses in the most tax efficient way.
What is the definition of a group relief group?
A Group relief group is established where one company is a 75% subsidiary of a parent company or both companies are 75% subsidiaries of the same parent company.
Any sub- subsidiaries must have an effective interest of 75%. Overseas companies can help to establish the group but can generally not participate in group relief.
What are the type of losses that can be surrendered in current year group relief?
Trade losses
Non-trading deficits on loan relationships.
Excess qualifying charitable donations.
Excess management expenses.
Excess property losses.
Excess non-trading losses on intangible fixed assets.
What is the maximum group relief that can be offset between 2 corresponding companies?
The maximum amount of loss that can be relieved is the lower of the claimants loss and the surrendering companies profit.
What is the strategy to determine the best way to group relieve companies?
Removing companies from the quarterly tax regime so preserve cashflow. e.g. make large companies small where possible.
Use losses as early as possible to generate a cashflow advantage. E.g. use carry back and current year 1st to generate tax refunds.
Avoiding unrelieved QCD’s
Which approach should be used when attempting a group planning question?
Identify what group relationships exist in the group structure.
Set out income/QCD’s of each company.
Leave gaps for loss reliefs.
Put losses/ excess QCD’s in loss memo.
Discuss options for loss and recommend appropriately.
What should be the order that losses are offset?
Current year, carry back and carry forward.
How does carry forward group relief work?
You can only offset the losses to other group companies after it has used them in its own company 1st. Therefore only excess losses can be carried forward.
How does carry forward group relief work?
You can only offset the losses to other group companies after it has used them in its own company 1st. Therefore only excess losses can be carried forward.
When must claims for carry forward group relief be made?
Claims for carry forward group relief must be made within the 2 years of the year end of the profit making company.
What is the definition of a consortium?
A relationship where two or more companies own 5 to 74.99% of the shares in another company.
Each consortium member has to have at least 5% share capital.
No individual member can own more than 75% of the consortium company.
How can consortium losses be distributed?
Consortium losses can be distributed either way between the consortium members and the consortium company, but not between the consortium members.
