Group tax minimisation approach

Question 1

What is the 1st step of the group tax minimisation approach?

Answer 1

The 1st step is to draw out a group structure and work out the number of related 51% group companies as well as identifying any group relief and gains groups.

Question 2

What is the second step of the group tax minimisation process?

Answer 2

Make a note of any coterminous year ends or and any companies being bought or sold during the year as these will need careful consideration. This will help to decide how the losses can be used.

Question 3

What is the 3rd step of the group minimisation approach?

Answer 3

To divide the £1,500,000 (quarterly instalment threshold) by the number of 51% group companies.

Question 4

What is the 4th step of the group tax minimisation process?

Answer 4

To set out a column for each group in the company and enter the results from the question. Capital losses brought forward must remain in the same company. Capital losses carried forward can only be offset against net gains in the same company.

Question 5

What is the 5th step of the group tax minimisation process?

Answer 5

Any brought forward losses (non capital) need to be identified and considered in addition to any current year losses.

Question 6

How can capital losses be offset within a group?

Answer 6

Capital losses can only be offset against capital gains within group.

Question 7

What should you do if companies within a group are paying tax through quarterly instalments?

Answer 7

You should try to offset their gains with other group companies or allocating group trade losses through group relief. This actions will help remove them from the quarterly paying regime.

Question 8

What do you do if you are given information about previous periods?

Answer 8

Consider a current year and a carry back loss claim period. A carry back period will generate a cashflow advantage.

Question 9

What do you do if any of your claims waste qualifying chargeable donations?

Answer 9

Make a note of this in your answer as some of your loss reliefs will now not be saving tax.

Question 10

What order should you offset losses within a group?

Answer 10

First consider allocating capital gains and losses around the group before considering any group relief and then finally deal with any consortium relief claims at the end.

Question 11

What is the last step of the Group tax minimisation approach?

Answer 11

Make a reasoned approach as to how the losses can be best utilized and only quantify the tax saving IF asked for it in the question.

Question 12

When is the earliest time that a company can join a 51% group?

Answer 12

Companies must have been part of the group at the end of the previous period to form part of a 51% group.

Question 13

What percentage of effective interest has to be owned in order for companies to form a group relief group?

Answer 13

75% effective interest needs to be owned in order to form a group relief group.

Question 14

What percentage of effective interest do companies need to form a chargeable gains group?

Answer 14

Companies need more than 50% effective interest to form a chargeable gains group.

Question 15

Which kind of losses cannot be used when joining a group?

Answer 15

Pre entry losses cannot be used to offset against income if the losses were generated prior to the company joining the group.

Question 16

How must losses be distributed if group companies do not have co-terminus periods?

Answer 16

Losses must be distributed by time apportioning the lower of the loss making companies loss or the profit making companies income. You must use which ever value is lower.