CTM80445 - Groups: group relief: example - surrender of excess management expenses
In the year ended 31 December 2012 Company U is a 75% per cent subsidiary of Company V, which is a group holding company. Both companies make up their accounts to 31 December. »Ê¹ÚÌåÓýapp accounts and computations of the companies for the 12 months accounting period to 31 December 2012 show the following.
| Company V | £ |
|---|---|
| Management expenses disbursed within year (CTA09/S1219 (1)) | (£5,000) |
| Management expenses brought forward (CTA09/S1223) | (£500) |
| UK property business income | £800 |
| Profits & gains from non-trading loan relationships | £3,000 |
| Company U | £ |
|---|---|
| Trading profits | £1,000 |
| Profits & gains from non-trading loan relationships | £500 |
| Qualifying charitable donations paid | (£200) |
Company U claims group relief from Company V, with the consent of Company V. Group relief is limited to the smaller of:
- Company V’s excess of management expenses (the only ‘relevant amounts�) over the ‘gross profits� for the accounting period (CTM80142 � note this is a period ending before 20 March 2013), and
- Company U’s ‘available total profits� as reduced by qualifying charitable donations paid (CTM80400).
Company V’s excess of management expenses over the total profits for the accounting period is £1,200. Under CTA10/S103 for group relief purposes management expenses do not include amounts carried forward from earlier periods. So, in this case, the £500 management expenses brought forward from the previous accounting period are disregarded.
Calculation of Company V’s excess management expenses for the purposes of group relief.
Management expenses (disbursed within year): £5,000
UK property business income: £800
Profits & gains from non-trading loan relationships: £3,000
Excess management expenses: £1,200
Company U’s ‘available total profits�, as reduced by other reliefs, is £1,300, calculated as follows.
Trading profits: £1,000
Profits & gains from non-trading loan relationships: £500
Total profits: £1,500
Less qualifying charitable donations paid: (£200)
Total profits as reduced by other reliefs: £1,300
So the group relief is limited to the smaller of £1,200 and £1,300, that is £1,200.
Company V’s CT computation for the accounting period to 31 December 2012 is as follows.
UK property business income: £800
Profits & gains from non-trading loan relationships: £3,000
Total Profits: £3,800
Less management expenses: (£3,800)
CT prodits: Nil
Company V’s carry forward position as at 31 December 2012 is as follows.
Management expenses (including amounts brought forward from earlier periods): £5,500
Less allowed in computation: (£3,800)
Surrendered as group relief: (£1,200)
Total management expenses utilised: (£5,000)
Excess management expenses available to carry forward: £500
Company U’s CT computation for the accounting period to 31 December 2012 is as follows.
Trading income: £1,000
Profits & gains from non-trading loan relationships: £500
Total Profits: £1,500
Less qualifying charitable donations: (£200)
Less group relief claimed: (£1,200)
Total reliefs claimed : (£1,400)
CT profit: £100