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CTA10/S137

CTA10/S137 provides that the group relief that a company may be allowed must not exceed the amount of the claimant company鈥檚 total profits actually arising in the accounting period in accordance with CTA10/S4(2).

This means total profits after any relief actually claimed or automatically off-set under the Taxes Acts except reliefs that are restricted under CTA10/Part7ZA and that cannot be quantified until the amount of the group relief claim is known. See CTM05010 for more on restricted reliefs.

Examples of unrestricted reliefs that are deducted are:

• any relief for UK property business losses of the same accounting period under CTA10/S62(3),
• any relief for non-trading loan relationship deficits of the same accounting period under CTA09/S459(1)(a),
• any management expenses of the same period under CTA09/S1219(1)
• any non-trading losses on intangibles under CTA09/S753, or
• qualifying charitable donations under CTA10/S189.

This list is not exhaustive.

The total profits must also be reduced by the following, regardless of whether such relief is actually claimed:

• any relief available to the company for a loss in trade in the same accounting period under CTA10/S37(3)(a),
• any relief available to the company for an excess of capital allowances in the same accounting period under CAA01/S260(3)(a).

The amount of the claimant company鈥檚 total profits is specifically not reduced by any relief derived from a subsequent period, including:

• relief under CTA10/S37(3)(b) for a trading loss of a later accounting period,
• relief under CAA01/S260(3)(b) for an excess of capital allowances of a later period, or
• relief under CTA09/S459(1)(b) (or in the case of an insurance company CTA09/S389) for a non-trading loan relationship deficit of a later accounting period.

A group relief claim may be further restricted where there is:

• more than one claimant in respect of the same loss or other amount, or
• more than one company surrendering a loss or other amount to the same claimant (CTA10/Ss138-142; CTM80210 onwards).

Subject to such a restriction, the effective limit of each claim is the lower of:

• the surrendering company鈥檚 surrenderable amounts for the accounting period, and
• the claimant company鈥檚 available total profits as reduced by other reliefs for the same and earlier accounting periods.

Example

Company M is a claimant company for group relief purposes, and wants to claim group relief from its parent company for the year ended 31 July 2011. Company M鈥檚 accounts for the year ended 31 July 2011 show the following:

Description	Amount
Trading loss	(拢50,000)
Non-trading loan relationship income	拢100,000
Chargeable gains	拢75,000
Chargeable losses brought forward	(拢50,000)
Charitable donations paid	(拢2,000)

The company decides not to claim relief for the trading loss under CTA10/S37. At this point the profits for 2011 are 拢123,000, as follows.

Description	Amount	Amount
Trading income	-	Nil
Non-trading loan relationship income	-	拢100,000
Chargeable gains	拢75,000	-
Losses brought forward	(拢50,000)	拢25,000
-	-	拢125,000
Charitable donations	-	(拢2,000)
Profit	-	拢123,000

The group relief, however, that Company M claims for the year ended 31 July 2011 cannot exceed 拢73,000. This is because its maximum group relief claim is reduced by the trading loss of 拢50,000, even though the company does not claim relief for the loss under CTA/S37(3)(a).

So Company M cannot claim group relief of 拢123,000. Its claim is limited to 拢73,000 (or the surrendering company鈥檚 surrenderable amount for the corresponding period, whichever is smaller).

Company M鈥檚 accounts for the year ended 31 July 2012 show a trading loss of 拢35,000, and the company claims under CTA10/S37(3)(b) for this amount to be set off against the profits for the accounting period ended 31 July 2011. So the company鈥檚 profits for the accounting period ended 31 July 2011 become 拢88,000, as follows:

Description	Amount	Amount
Trading income	-	Nil
Non-trading loan relationship income	-	拢100,000
Chargeable gains	拢75,000	-
Losses brought forward	(拢50,000)	拢 25,000
Losses carried back from accounts y/e 31 July 2012	-	(拢 35,000)
-	-	拢 90,000
Charitable donations	-	(拢 2,000)
Profit	-	拢 88,000

The maximum group relief that Company M can claim for the year ended 31 July 2011 remains at 拢73,000. This is because its maximum group relief claim is not affected by the carry-back of losses under CTA10/S37(3)(b). The maximum group relief claim is still reduced by the trading loss of the year of 拢50,000, even though the company does not claim relief for the loss under CTA10/S37(3)(a). So Company M鈥檚 available total profits are still limited to 拢73,000. This amount will be compared to the amount available for surrender (see CTM80215).