Groups

Question 1

Define a 75% group relief group

Answer 1

A loss relief:

Must have >75% direct, or indirect interest in a company.

Question 2

List the tax implication of being in a 75% group relief group.

Answer 2

Surrendering company:
- CY trading losses
- Deficits on NTLR
(doesn’t have to offset against it’s own profits first)

B/F losses - must offset against it’s own first.

• Trading losses
• Deficits on interest income
• unrelieved management expenses
• unrelieved property losses

To any group member for any amount.

Claimant:
Offsets against CY TTP;
Max claim = TTP
TTP X
Less B/f (X)
Less CY (X)

Question 3

List the tax implications of Pre-entry trading losses carried forward

Answer 3

Not available to surrender to the companies within the new group for five years.

Companies already in the group can surrender to new company

Corresponding AP begins when they join group (pro-rate)

Question 4

When does group relief cease to be available when a company leaves the group?

Answer 4

When the arrangements are in place to sell the shares or a company.

Date agreed with HMRC

Could be different from date they actually leave.

Question 5

Define a consortium

Answer 5

1. Two or more companies own another company
2. Each company must own >5% but less than 75% each.
3. Together the companies (consortium members) must own at least 75% of the consortium company.

Question 6

List the tax implication of being in a consortium

Answer 6

Relief:
Consortium company losses:
Consortium company can surrender losses to consortium members:

• Max % loss available to surrender = consortium members ownership %.
• Must first relieve loss against current profits before QCD.

Consortium member losses:
CM's can surrendered their losses to Consortium company.
- Max loss = CM's share of profits
-No loss relief available between CM's.
- Corresponding AP applies.

Question 7

Define a gains group

Answer 7

Must have >75% direct interest in subsidiaries and their subsidiaries:
- Ord shares

Principle company must have > 50% indirect interest in sub subsidiaries (0.75 x 0.75)

• Ord shares
• Distributable profits
• And assets on winding up

Can only be in 1 gains group

Question 8

List the tax implication of being in a gains group

Answer 8

Assets transferred at NG NL

Chargeable gains and allowable losses can be offset within the group.

Group Roll-over relief available

Question 9

List the tax implication of being in a gains group

-Transfer of assets

Answer 9

NG/NL

Cost indexed at transfer to give base cost.

When sold outside group - normal gain calculation.

When company leaves the group and still owns asset within 6 years of transfer …..
De-grouping charge

Question 10

What is the matching election for capital gains groups?

Answer 10

• CY capital Gains or losses can be transferred in full or in part to another group company
• enables CY g/l to be matched
• Utilisation of losses b/f

Must be made within 2 years of end of AP of disposal.
Only transfer gain/loss so save in legal admin fees

Question 11

How do you calculate a de-grouping charge?

How is it treated?

Answer 11

SP (MV of day of intra-group transfer)
Less Base cost
= de grouping gain/loss

Added to (loss deducted from) consideration received for the sale of shares.

Likely to be covered by SSE.

Question 12

What are stamp tax implications of transferring assets/ company leaving the group.

Answer 12

• No charge where assets transfer between 75% group companies
• If transferee leave group within 3 years, exemption is withdrawn and SD/SDLT becomes payable.

Question 13

What is the implication of the transfer of intangible assets?

Answer 13

• Intangibles transferred between members of a capital gains group on a tax neutral basis ie transferee copany takes over the TWDV
• If transferee co leaves within 6ys, and still owns, deemed disposal and reacquisition of asset using MV at time of intra-group transfer. (like de-grouping charge)
• This charge arises in the company leaving BUT it can be re-allocated to a company within the group.
• Deemed disposal doesn’t take place where the disposal of shares qualifies for SSE. Asset remains at TWDV and continue to attract relief as they did before degroup.

Question 14

Pre-entry Capital losses. How do you identify?

Answer 14

Losses have been realised on disposals made before the company joined the group.

Question 15

How can you use Pre-entry capital losses?

Answer 15

Can be used against gains on assets:

• Sold before joining the group
• Owned when join the group and sold later
• Purchased after joining the group from a 3rd party; and used in the same company.

Cannot group relief!!

Question 16

Define a VAT group

What are the consequences

Answer 16

Common control - can be companies and individual

• 1 member responsible for accounting for VAT
• No VAT on intragroup sales
• one VAT returns to prepare
• All members jointly/severally liable for VAT