Group relief - unincorporated associations

Group relief - unincorporated associations

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One group of people run a sport association and trades with the public 3 times a year to generate income. The same group of people decided to start another trade all for the cause of the future survival of their group.  The second business trades with the public.  One trade is making a loss but the other a profit.  Is group relief available?  Can I offset a loss brought forward in trade A against the current year profit in trade B?

Thanks

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By Ernest N Dever
25th May 2011 15:16

Is there one association or two?

One association carrying on two businesses can offset the losses.  Two associations can't because the group relief relationship depends on shareholdings.  How are these arrangements constituted?

If it's the same association, it may be arguable that trade 2 is an extension of trade 1, giving the best of all worlds.  Unfortunately you haven't given enough information.

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By imbs
25th May 2011 16:03

Thanks

Apologies for that.  There is one association, constitution document back in 1970's and has not been updated to include the new trade.

So essentially, one body, two trades. 

Group relief not applicable since only applies to limited companies (i.e not to other unincorporated entities which have to submit CT returns - is this correct? - seems a  bit incongruous).

Therefore, it seems that relief available is similar to that of a sole trader - i.e. loss in one trade can be offset against a loss in another trade in that year or else carried back.  But losses  brought forward can only be offset against future profits of the same trade.

So this means that I cannot claim relief for the losses brought forward in trade A against trade B's current year profit?

Is this correct or have I got myself all tangled up somewhere?

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By Ernest N Dever
25th May 2011 16:29

That's right...

... any body within the charge to Corporation Tax who has two trades can only make a current set-off of its losses in one of its trades against the rest of its total profits.

What group relief does is allow two companies in the same group to set current losses between the companies.  However, one must be a 75% subsidiary of the other or both must be 75% subsidiaries of a third body corporate.  The definition of 75% subsidiary hinges on ordinary share capital.

In your case, you could try arguing that both activities are components of the same single trade.

Otherwise you'll have two trades and can only set losses off in the current period, as you say.

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