CFM35650 - Loan relationships: consortia companies and impairment: amount of restriction: example
Example: restriction: net consortium debit
Porwin Ltd is a consortium company owned
- 50% by Ulla (South) Ltd
- 50% by Rewdon Manufacturing Ltd.
Ulla group
Ulla (South) Ltd and Ulla (North) Ltd are members of the Ulla group of companies.
Year 1
Ulla (South) Ltd lends Porwin Ltd 拢30,000. Ulla (North) lends it 拢60,000. Ulla plc lends it 拢100,000 and writes this down by 拢50,000. This is an impairment loss.
The net consortium debit is 拢50,000.
Year 2
Ulla (South) Ltd writes down 拢20,000 of its loan. Ulla (North) Ltd writes down 拢40,000, while Ulla plc reduces its provision for impairment by 拢15,000.
The net consortium debit for the Ulla group in Year 2 is
| Written off | 拢60,000 |
|---|---|
| Impairment reduction credit | 拢15,000 |
| Net consortium debit | 拢45,000 |
Rewdon group
Rewdon Manufacturing Ltd is a member of the Rewdon group.
Year 1
In this year, Rewdon Manufacturing Ltd made a loan of 拢100,000 to Porwin Ltd. Rewdon Manufacturing Ltd has written it down to 拢40,000, charging an impairment debit of 拢60,000. No other member of the Rewdon group has made a loan to Porwin Ltd.
The net consortium debit for the group for this year is 拢60,000.
Year 2
There were no impairment losses or reversals.
The amount of the group relief restriction
The amount of restriction to impairment debit and release debit {#}hinges on the group relief that each consortium member, or members of its group, claims from the consortium company.
So if, in Year 1, Porwin Ltd (owned 50% by Ulla (South) Ltd and 50% by Rewdon Manufacturing Ltd) has losses of 拢102,000 available to surrender, the maximum amount of group relief that the Ulla group can claim, under CTA10/S143, is the lesser of
- 50% of the loss available to surrender (拢51,000)
- the amount of total profits as reduced by any other relief.
The same rules apply to the Rewdon group.