My VIP Tax Team question of the week: Consortium relief
My client is a profit-making UK trading company that owns 45% of a loss-making UK trading company. Is there any way for my client to use the losses? 40% of the loss-making company’s shares are held by another unconnected UK company and the remaining 15% by an unconnected individual.

Consortium relief is likely available in this situation.
The relief would allow a company owned by a consortium (CC) to relieve some of its losses against the profits of the members of the consortium (CM).

A company is defined as owned by a consortium if the conditions in CTA 2010 s.153 are met.
They are:

  • The company is not a 75% subsidiary of any other single company, and
  • At least 75% of the share capital is owned by other companies that each hold at least 5% of the shares.
  • The CC must also be a trading company.

In this case as companies own more than 75% of the shares in the trading company then a consortium company exists and relief is available.

CMs do not need to be UK tax resident for the above test of whether there is a consortium company, but only companies within the scope of UK corporation tax will benefit from relief.

The exact proportion that can be relived is based on the reality of the ownership of the CC and full details can be found in CTA2010 s.143 (which considers ordinary share capital, profits available for distribution, assets available for distribution on a winding up and voting power), but for most situations it will match share percentage ownership.

The usual group relief restrictions apply for non-matching year ends, which is more commonly the case for consortium companies, and relief is only available for overlapping periods. CTA 2010 s.143(2)

So, it appears 45% of the losses of the CC are available for relief in your client’s company in the current year. Only losses up to the value of available profits can be relieved.

If the CC made losses since 1/4/17, that have not been relieved yet, these can be carried forward and relieved in a consortium relief claim by the CMs under Chapter 3 Part 5A CTA 2010 with the same restrictions as above for current year consortium relief.
In addition, the deduction restrictions of Part 7ZA CTA 2010 (50% restriction on profits over £5 million) would also apply.

Assuming the losses are not subject to the above Part 7ZA restriction, then 45% of the brought forward losses would also be available for relief in your client’s company, providing it has sufficient profits to utilize the loss.

It is also possible for the CC to use losses of the consortium members to relieve its profits but there is no mechanism for the consortium members to surrender losses to each other.

HMRC’s guidance on consortium relief is at CTM80000

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Tax Adviser
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Alec has worked at Croner Taxwise since 2014. He has successfully completed his IR35 training and undertakes contract reviews. Alec gained his tax knowledge whilst working in the consultancy department of Croner Taxwise and he is currently working towards the ATT qualification.

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