420 Losses, etc which may be surrendered by means of group relief

Summary

This section provides for group relief in respect of trading losses, capital allowances, expenses of management and charges on income. Where for an accounting period a surrendering company has incurred a trading loss, the loss may be set off against the claimant company’s profits for a corresponding accounting period.

Group relief is provided in respect of capital allowances which are given by way of discharge or repayment of tax or in charging income from rents. Relief is not given, however, on amounts carried forward from a previous accounting period.

Group relief is provided in respect of management expenses of investment companies. The relief to a claimant company (which need not itself be an investment company) is limited to any excess of current management expenses of an investment company over current profits for the accounting period. For this purpose, the profits of the surrendering company against which the excess is measured are those for the accounting period before deduction of any management expenses or the set-off of any allowances carried forward. Group relief for management expenses is not allowable in the case of life assurance business.

Group relief is provided for charges on income. The relief is limited to the excess of charges paid in the period over the profits actually arising in the period.

Where the claimant company is a member of a consortium, a fraction only of the loss or excess may be set off and that fraction is equal to the company’s share in the consortium subject to any further reduction to be made in ascertaining the amount for a corresponding accounting period by virtue of section 422.

Details

Trading losses

(1) Where for an accounting period a surrendering company has incurred a trading loss in a trade which is within the charge to corporation tax in the State, that loss may be set off against the claimant company’s profits for a corresponding accounting period. As a trading loss computed for the purposes of section 396(2) includes any capital allowances to be made in taxing the trade for the period, the losses surrendered will include those capital allowances.

Excluded from group relief is a loss incurred in a trade carried on abroad the profits of which are assessable under Case III of Schedule D (section 396(4)), or a farm loss which does not qualify for loss relief because the farming was not carried on a commercial basis with a view to making a profit (section 663).

Also excluded are losses of a life assurance company to the extent that such set-off would reduce the profits attributable to policyholders of the company.

Capital allowances

(2) Group relief is available in respect of capital allowances which are given by way of discharge or repayment of tax or in charging rents and analogous income under Case V of Schedule D, to the extent that the allowances are not exhausted by associated current income of the accounting period. Group relief is not to be given on amounts carried forward from a previous accounting period.

Management expenses

(3) Group relief is available in respect of management expenses of investment companies. The relief to be transferred to a claimant company (which need not itself be an investment company) is limited to any excess of current management expenses of an investment company over current profits of the accounting period.

(4) In determining the amount of any such excess, the profits of the surrendering company against which the management expenses are to be measured are the profits of the accounting period before deduction of any management expenses or the set-off of any allowances carried forward.

(5) Group relief in respect of management expenses is not allowable in the case of a life assurance business.

Charges on income

(6) & (7) Group relief for charges on income is limited to the excess of charges paid in the period over the profits actually arising in the period before any deduction for losses, capital allowances or management expenses of any other period.

Consortium relief

(8) Where the claimant company is a member of a consortium, a fraction only of the loss or excess may be set off in accordance with the preceding provisions. The fraction which may be set off is to equal the company’s share in the consortium subject to any further reduction to be made in ascertaining the amount for a corresponding accounting period by virtue of section 422(2).

“New basis” Life assurance business

(9) Losses arising from life business which is “new basis business” as defined in section 730A can be surrendered by way of group relief.

Relevant Date: Finance Act 2019