Groups

Question 1

who is group loss relief available to?

Answer 1

members of a 75% group

Question 2

two companies are members of a 75% group if…

Answer 2

• one company is the 75% subsidiary of the other

or

• both companies are 75% subsidiaries of a third company

Question 3

for group loss relief, do you need a ‘strict’ 75% group?

Answer 3

yes

this means the direct and indirect holding must be at least 75%

Question 4

can a company be a member of more than one loss group?

Answer 4

yes

Question 5

do group relief rules apply to o/s companies too?

Answer 5

yes

groups can be created through companies resident anywhere in the world

the companies claiming/surrendering group relief must be UK resident, however

Question 6

how does group relief work?

Answer 6

companies which form part of the same group relief group can transfer losses

only brought forward and current period losses can be surrendered

losses carried back cannot be surrendered

Question 7

which losses can be surrendered?

Answer 7

• brought forward losses
• current period losses

Question 8

‘surrendering company’?

Answer 8

the company that surrenders/gives up its loss

Question 9

‘claimant company’?

Answer 9

the company to which the loss is surrendered

Question 10

when must the claim for group relief be made?

Answer 10

within two years from the end of the relevant accounting period

Question 11

maximum group relief?

Answer 11

lower of:
- available loss of the surrendering company
- available profits of the claimant company

Question 12

how much property loss is available to surrender?

gains = 50,000
property losses = -60,000

Answer 12

-60,000 + 50,000 = -10,000 available to surrender

net off property losses automatically against CY total income, net can be surrendered

Question 13

how should a surrendering company utilise their brought forward losses?

Answer 13

use them as much as possible against their own profits before they can be group relieved

Question 14

how to calculate the available profits of the claimant company?

Answer 14

TTP xxx
less: CY trading losses (xxx)
less: b/f trading/NTLR losses (xxx)
less: CY NTLR deficits (xxx)

equals: available profits in claimant company xxx

Question 15

do carried back trading losses or NTLR deficits affect the maximum that can be claimed as group relief?

Answer 15

no

Question 16

current year group relief is set off against…

Answer 16

TTP

(unlike single company gains which are offset against total profits)

this can help maximise the benefit of QCDs

Question 17

considerations for group loss relief?

Answer 17

• group relief in current period saves tax now
• group relief may enable group to save tax at highest rate
• avoids wasting qcd’s

Question 18

what is a chargeable gains group?

Answer 18

for a chargeable gains group to exist, there must be a direct holding of at least 75% but the indirect holding of the principal company only needs to be 50%

Question 19

can subsidiaries be a member of more than 1 gains group?

Answer 19

no

Question 20

can non-uk resident companies act as links in gains groups?

Answer 20

yes, but cannot participate in the gains group

Question 21

implications of being in a gains group?

Answer 21

• assets are transferred within the group at no gain/no loss, but degrouping charges pay apply
• capital gains/losses may be reallocated around the group
• reinvestment of proceeds for rollover relief/holdover relief purposes may be made by another group member

Question 22

how does NGNL transfers work between companies in a gains group?

Answer 22

chargeable assets are transferred between group companies at no gain/no loss

any actual proceeds are ignored

the deemed proceeds for the transferor/costs for the recipient are equal to cost plus indexation up to the date of the transfer (dec2017 if earlier)

if recipient later sells the asset outside the group, the deemed cost is indexed from the date of transfer up to the date of disposal

Question 23

calculation for NGNL transfers between gains group companies?

Answer 23

proceeds xxx

less: cost (original cost + IA to date of NGNL transfer/dec17) (xxx)

less: IA (from date of NGNL transfer to date of disposal/dec17) (xxx)

equals: gain/loss xxx

Question 24

when does a degrouping charge arise?

Answer 24

when
- a company leaves a gains group
- within 6 years of the NGNL transfer
- still owning an asset received via NGNL from another company in that gains group

Question 25

what is the degrouping charge figure?

Answer 25

the gain that would have arisen at the date of the NGNL transfer if the asset were sold for its MV outside the gains group proceeds xxx less: cost to transferor (xxx) less: IA (from purchase date to date of NGNL transfer/dec 17) (xxx) equals: degrouping charge any future disposal of the asset, the departing company will then be treated as having a base cost equivalent to the market value on the transfer date

Question 26

how is a degrouping gain handled?

Answer 26

- added to sale proceeds received on disposal of the shares - exempt if the disposal of shares qualifies for SSE

Question 27

how is a degrouping loss handled?

Answer 27

- added to the allowable cost of the shares being sold - not allowable if the disposal of shares qualifies for SSE

Question 28

if degrouping charge is exempt due to SSE, what happens to the base cost?

Answer 28

will still be uplifted to its MV at the time of the NGNL transfer

Question 29

can gains/losses be reallocated across a gains group?

Answer 29

yes a joint election can be made to allocate all/part of a current year capital gain/loss made by one group company to another group company to make use of capital losses b/f capital losses CANNOT be reallocated

Question 30

for holdover/rollover relief purposes, how is a gains group treated?

Answer 30

as a single trade this means that a gain on disposal of a qualifying asset in one group company, can be rolled/held over against the purchase of qualifying assets by another group company (within permitted timeframe)

Question 31

qualifying period for rollover/holdover relief?

Answer 31

from 12 months prior to 36 months post the sale of the old asset, the new asset must be purchased