Groups - corporation tax

Question 1

For group loss relief, what must the indirect and direct holding be?

Answer 1

Direct and indirect holding must be at least 75.%

Question 2

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

Answer 2

Yes.

Question 3

Overseas companies can be part of the group but…?

Answer 3

• They cannot benefit from group loss relief.
• Only UK-resident companies can benefit from group loss relief.

Question 4

Can losses carried back be surrendered?

Answer 4

No, only the following losses can be surrendered:
- Brought forward losses
- Current year losses

Question 5

Trade losses and NTLR can be…?

Answer 5

Given away at any amount (don’t have to use c/y against own profits).

Question 6

Property losses can be…?

Answer 6

Given away at excess (after using c/y against own profits).

Question 7

Does the annual deduction allowance for brought forward losses apply to group relief?

Answer 7

• Yes.
• £5million + (excess over £5mil x 50%).

Question 8

For chargeable gains groups, what is the direct and indirect holding?

Answer 8

• Direct holding is at least 75%
• Indirect holding is at least 50%

Question 9

Can we have multiple gains groups (for chargeable gains) like loss groups?

Answer 9

No.

Question 10

What are the implications of being in a gains group?

Answer 10

• Assets transferred within group at NGNL (no gain/no loss) BUT degrouping charges may apply.
• Capital gains and capital losses may be reallocated around the group
• The reinvestment of proceeds for rollover/holdover relief purposes may be made by any group member

Question 11

What is the difference between normal NGNL and group NGNL?

Answer 11

There’s an indexation allowance.

Question 12

When does a degrouping charge apply?

Answer 12

When:
- a company leaves a gains group i.e. is sold
- within 6 years of the NGNL transfer
- still owning an asset received via NGNL from another company in that gains group

Question 13

If a recipient later sells an asset that was transferred within the gains group - how is the cost indexed?

Answer 13

Indexed from the date of purchase to date of NGNL transfer/December 2017 (if NGNL transfer is post Dec. 2017)

Question 14

How is the degrouping charge calculated?

Answer 14

• The charge is the gain that would have arisen at the date of the NGNL transfer if the asset had been sold at its MV outside the gains group.

Question 15

When a company leaves a gains group, how is the base cost of any NGNL transferred assets affected for future disposals?

Answer 15

The base cost becomes the market value at the date of the NGNL transfer.

Question 16

What is the qualifying time period for rollover relief?

Answer 16

• 12 months before the disposal date
• 36 months after the disposal date
• 4 years in total

Question 17

What if there is a degrouping loss on shares?

Answer 17

• It is added to the allowable cost of the shares being sold.
• Not allowable if the shares qualify for SSE

Question 18

What if there is a degrouping gain on shares?

Answer 18

• It is added to the sale proceeds received on the disposal of the shares.
• Exempt if disposal of shares qualify for SSE.

Question 19

How does holdover relief work?

Answer 19

When a capital asset is sold and reinvested into a DEPRECIATING asset (life less than 60 years) - the gain is frozen.

Question 20

When does the held-over gain become chargeable?

Answer 20

Earliest of:
- disposal of the depreciating asset
- 10 years from acquisition of the depreciating asset
- when it stops being used in the trade

Question 21

On what condition can the gain held-over on a depreciating asset be rolled into a non-depreciating asset?

Answer 21

If the non-depreciating asset is acquired BEFORE the depreciating asset becomes chargeable.

Question 22

When rollover relief is involved, is it applied before or after indexing the gain?

Answer 22

Always AFTER indexing the gain.