Corporate groups and consortia Flashcards
A group exists for tax purposes
Where one company is a subsidary of another
What are the 4 types of group relationship?
Common control for allocation of AIA
75% groups for group loss relief
Consortia
75% groups for capital gains
AIA can be
Allocated within the group in a way that is most tax efficient
For group relief purposes there should be
For mini groups
For chargeable gains groups
75% control
50%
75% / 50%
A consortium owned company is
A company of which 5-74.99% of its shares are owned by 2 or more companies. One of the members cannot own more than 75%
It can claim and surrender losses to consortium members in propertion to its shares.
Parent undertaking
A company is a parent undertaking if:
It holds majority of the voting rights
Is a member of the undertaking and has the right to appoint or remove directors
Has the right to exercise a dominant influence
Controls alone
A parent undertaking must satisfymone of these at the end of the reporting period.
Companies are related to one another if
They share the same premises or carry on similar activities
Group relief allows
UK resident members of a 75% group gto transfer current accouting period and b/f losses to eachother.
Group relief can be split between
75% subs and between eachtoher if they are both 75% subs of the same parent company.
For a company to be a 75% sub
The parent must:
Own at least 75% of the ordinary share capital
Be entitled to at least 75% of the subs assets on winding up
Be entitled to at least 75% subs income on distribution
The following types of loss can be surrendered
Trade
Non trading deficits on loan relationships
Excess QCD’s
Excess management expenses
Excess property losses
Excess non trading losses on intangible fixed assets
Notes to point on loss surrenders
Any amount can be surrendered
There is no need to offset trade or non trade loan relationship deficits against the surrendering companies profits first
Any thing else can only be offset when it exceeds the surrendering companies profits i.e excess.
When a company leaves a group, the group relief is deemed to end
When arrangements are in place for the sub to be sold.
A company can surrender any amount of b/f losses from
Trading
Property
NTLR deficits
Management expenses
BUT these can only be surrendered if the company cannot deduct them from it’s own total profits and the claimant company must use it’s own losses to the fullest extent possible
Losses surrendered under carried forward group relief
Must be set against profits of an overlapping accounting period which is one that falls within botht the following:
Accounting period to which the surrendering company has carried forwards the loss
Consortium relief
Losses can flow between a consortium company (it’s 90% sub) and it’s members but not between the members
The maximum consortium relief is:
Lower of:
Consortium memebrs result
The consortium emmbers percentage interest multiplied by the result
Chargeable gains groups
Must have 75% ownership of sub and at least 50% of effective interest in further subs
Can be established with over seas companies
Intra-group transfers
Capital assets are automatically transferred between the group at no gain no loss.
Intangible assets are transferred at TWDV
Capital gains within the group can be
offset against one another to minimise CT
This way you can also reallocate losses to the smaller companies when the larger companies have to pay by installments, this way it reduces the payments and improves cash flow
When may a de-grouping charge arise?
When an asset has been transferred on a NG NL basis between companies in a chargeable gains group and within 6 years of the transfer shares in the recipient are sold such that it leaves the gains group
The degrouping gain or loss
Is added to or deducted from the proceeds recxieved on the sale of the shares that led to the recipient leaving the group
SSE may apply
Change in ownership
If a company joins a group it’s c/g=f losses cannot be surrendered to the group for 5 years but there is no restriction on the rest of the group surrendering it’s losses.
Successions to trade
Generally if a trade is transferred form one company to another then it is treated as a start of one trade and the end of another.
Transfer of trade within a group (Succession)
A succession is treated as a continued trade if transferred within a 75% group.
An accounting period ends on the date of transfer
CA are claimed as normal
Company B can use c/f trading losses not utilised by company B
Only trading losses are transferred with the trade.
Restriction on the c/f of transferred losses
If the selling company A has had:
A change of ownership and sells it’s trade within the period fo 3 years before to 5 years after the change in ownership. Then for a 5 year period from the change in ownership the acquiring company can only use company A’s c/f against the trade that has been transferred (not total profits).
