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

Test your understanding: answers

(1). ZF Ltd is associated with seven companies at some point in the year ended 31 March 2024 as set out below.

LJ Ltd and its two remaining 100% subsidiaries.

PH Ltd and its two 80% subsidiaries.

KG Ltd (because it and PH Ltd are controlled by Mr Tada).

(2). The quarterly payments threshold of £1,500,000 must be divided by one plus the number of associated companies in relation to CX Ltd as at 31 March 2023 (the end of the previous accounting period). There are four associates; MK Ltd, its other 100% subsidiary and its 55% subsidiary and RT Ltd.

RT Ltd is included as it is under common control.

JN Ltd and its two subsidiaries are not associated companies as at 31 March 2023.

Therefore the quarterly payments threshold for CX Ltd will be £300,000 (£1,500,000 divided by 5).

(3). 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%.

(4). 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.