Corporation tax – Group relief for ATX (UK) - part 3: self-test answers

Test your understanding: answers

(1). The quarterly payments threshold of £1,500,000 must be divided by one plus the number of 51% group companies in relation to CX Ltd as at 31 March 2018 (the end of the previous accounting period). There are three 51% group companies; MK Ltd, its other 100% subsidiary and its 60% subsidiary.

JN Ltd and its two subsidiaries are not 51% group companies (in relation to CX Ltd) as at 31 March 2018.

RT Ltd is not included because it is not a member of the corporate group.

Therefore the quarterly payments threshold for CX Ltd will be £375,000 (£1,500,000 divided by 4).

WF Ltd will be able to surrender losses to BG Ltd if it is a consortium company. It will be a consortium company if:

  • it is not a 75% subsidiary of another company, and
  • companies, each of which own at least 5% of WF Ltd’s ordinary share capital, together own at least 75% of its ordinary share capital. So a further 55% of its ordinary share capital must be owned by companies, each of which owns a minimum of 5%.

(3). Statement A is false
Group relief is set off against the recipient company’s taxable total profits of the corresponding accounting period. Accordingly, the maximum amount of group relief a company may receive is an amount equal to its taxable total profits.

Taxable total profits are after deducting all reliefs for the current period and amounts brought forward. Current period trading losses in the claimant company must be deducted regardless of whether or not a claim is made to offset the current period losses against total profits.

Statement B is false
The claim to carry back losses for offset against total profits of the previous 12 months is an all or nothing claim; it cannot be restricted to a particular amount.

Statement C is false
A company may only surrender a carried forward loss which it is unable to use against its own taxable profits.