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Group relief

Interaction with b/f losses

Didn't find your answer?

The legislation does seem clear enough but it's one of those moments when I'm having self-doubt, so if someone could confirm my understanding I'd be most grateful.

Company A has trade profits for the year, but trade losses (both pre and post April 2017) brought forward. Company B has trade losses for the year, which losses are unlikely ever to be used by B. So, my understanding is that A does not need to claim for losses b/fwd (and does not need to be deemed to have made a claim in calculating available profits) so that A's profits can be fully covered by losses surrendered by B.

Correct?

Replies (6)

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By Duggimon
22nd Sep 2021 09:22

I don't think that's right, I think group relief is always after brought forward losses, per CTA 2010 s137

However B's losses can be carried forward and used as group relief in a future period, so they're not lost even if not transferred this year.

I do however accept that you're usually much more on the money with the intricacies of tax legislation than I am, so accept I might be overlooking something!

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Replying to Duggimon:
Psycho
By Wilson Philips
22nd Sep 2021 10:29

Thanks for the response.

s137(6) refers only to a deemed claim under s37 (current year losses). It makes no mention of s45.

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Replying to Wilson Philips:
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By The Dullard
22nd Sep 2021 12:10

But s 45 applies automatically for the purposes of s 4(2) and s 137(4), unless a claim is made under s 45(4A); which is where I think your answer lies.

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Replying to The Dullard:
Psycho
By Wilson Philips
22nd Sep 2021 13:05

Thanks

My problem is that s4(2) exists for the purposes of determing the actual amount of profits subject to corporation tax reflecting all claims etc actually made, not the amount that would be so chargeable if all available reliefs etc were claimed. So s4(2) should reflect a claim under s45(4A).

So if a claim is to be made under s45(4A) there is to be no deduction under s45 at s4(2) - if s4(2) were to ignore such a claim in any event then it would make s45(4A) redundant. s137(4) refers to the deductions to be made at Step 2, not all deductions which may potentially be made at Step 2.

HMRC's guidance (your thoughts on which I am well aware of) is far from conclusive but it does specifically mention the reliefs etc that are to be applied in preference to group relief claims and brought forward losses are notable by their absence.

Or are you simply suggesting that the client needs to make a s45(4A) claim in order to achieve what I believe to be the outcome? It's not clear from your comment.

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Replying to Wilson Philips:
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By The Dullard
22nd Sep 2021 13:39

I am saying that I believe a claim needs to be made under s 45(4A).

Where are you taking the "all available reliefs are claimed" point from? s 137(6)? As you note, that only applies to claims under s 37 (and CAA 2001, s 260(3)).

It's also worth observing that a claim under s 45(4A) isn't a claim to a relief. It's a claim to disapply a relief. Such a claim might be the reason for the notable absence you refer to.

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Replying to The Dullard:
Psycho
By Wilson Philips
22nd Sep 2021 14:01

Your first sentence clarifies your position, and puts my mind at ease. Thank you.

The rest stems from my lack of understanding where you were coming from. I first read your previous response as an indication that b/f losses would always have to be taken into account before group relief.

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