How can group relief be obtained on corporation tax?
A company that is a member of a 51% group, can make annual payments to (and receive annual payments from) other members gross, i.e., without deduction of income tax. Similarly, if the company’s ordinary share capital is jointly owned as to 75% or more by a consortium of not more than five other companies, none of which owns less than 5% of its ordinary share capital, it can make annual payments gross to the consortium members.
Conditions for surrender of trading losses
If a company is a member of a 75% group, it can surrender, and receive, current (but not carried forward) trading losses (including excess management expenses, excess rental capital allowances, and excess charges) to other members. Similarly, if a company’s ordinary share capital is jointly owned as to 75% or more by a consortium of not more than five other companies, none of which owns less than 5% of its ordinary share capital, it can surrender such a trading loss (including excess management expenses, excess rental capital allowances and excess charges) to the consortium members.
A company cannot surrender (or receive) group loss relief unless the parent genuinely owns 75% or more of the subsidiary’s ordinary share capital, and is entitled to at least 75% of its profits, and 75% of its assets in the event that the subsidiary is wound up. In other words, temporary 75% relationships do not qualify.
The group members and consortium members may be resident in an EU State, but the surrendering company must be within the charge to corporation tax, i.e., tax resident in Ireland.
If a company is claiming group relief, its accounting period and that of the surrendering company should ideally match. If the accounting periods do not exactly coincide, the claimant company is allowed group relief for the “overlap” part of the loss, i.e., the part of the loss that is common to the surrendering company’s accounting period and the claimant’s accounting period.
The claimant and the surrendering company must also meet the group (or consortium) ownership conditions during the whole of the accounting period. Therefore, if either company leaves the group, the departing company is only entitled to relief up to the date of its departure.
Order of relief
A company may only deduct surrendered group relief from total profits after using up any carried forward relief and current relief, including relief in respect of charges. Relief that may be carried back from a future period (trading losses, excess capital allowances and terminal loss) is ignored.
Trading losses and excess capital allowances for the current period are given on the basis that the company claims any trading losses and excess capital allowances brought back from the next accounting period.
Group relief for a current accounting period must be claimed before any relief carried back from a later period.
Chargeable gains group
If a company is within a 75% group, it can transfer assets to other members without triggering a chargeable gain. If your company disposes of an asset outside the group, it is regarded as having acquired the asset when it was first acquired by the group (i.e., the first group member).