02 - Groups - CT and VAT.

sRelated 51% group companies:

One company directly or indirectly owns more than 50% of another, | or both are 51% subsidiaries of a third company.

Group relief (GR) group:

A parent company and all its direct| and indirect 75% subsidiaries.| The definition of 75% subsidiary is extended for GR purposes only.| In addition to owing 75% of shares, the parent must also be entitled to received 75% profits and assets on WINDING UP.

Capital gains (or loss) group:

A parent company and its 75% subsidiaries, | provided that principal member has more than 50% of effective interest in subsidiary. | A 75% subsidiary of a principal member cannot be a principal member itself.*

75% subsidiary:

One company owns at least 75% of SC of another. | or Both are 75% subsidiaries of a third company. | Includes direct and indirect holdings. | Including overseas companies.

Consortium owned company:

At least 75% ordinary SC owned by companies, | each owing at least 5%, | and each member is entitled to at least 5% of PROFITS and net assets. | Excludes a company that is 75% subsidiary of another.

Related 51% group companies include:

Overseas resident companies too. | Companies leaving group.

Related 51% group companies exclude:

Dormant companies (if dormant for the whole period). | Non-trading holding companies. | Companies joining the group.

The number of related companies is based on the position at ... accounting period, hence the treatment of companies joining and leaving in the period.

at the END of the previous accounting period

DIVIDE the THRESHOLD by the number of related companies to determine whether...

whether instalments are necessary.

Dividends from related UK and overseas companies are ... in augmented profits.

not included

AIA and 51% group.

Only one AIA is allocated between group companies.

VAT ... available.

VAT group registration

Group payment arrangement are available if...

at least one company pays by quarterly instalments.

Group relief (GR) transfers losses between ......

any member of a GR group.

GR and overseas companies.

Group includes overseas companies | but the relief can generally only be claimed by UK resident companies.

A company can surrender any amount of ... year losses.

of current year

GR. A company can surrender any amount of current year of:

Trading loss, | Non-trading loan relationships (NTLR) debits.

GR. A company can surrender a trading loss and debits on trading loan relationship PLUS excess of:

QCD relief. | UK property losses. | Expenses of management.

GR. A company can surrender brought forward:

NTLR debits. | Expenses of management. | Trading losses. | UK property losses.

The surrendering company can only surrender to the extent it...

it cannot use the above against its own total profits.

GR. Maximum claim formula:

TTP less Current year losses

GR. Non-coterminous APs:

GR restricted to common accounting period (profits deemed to accrue evenly).

GR. Companies joining group:

GR available for losses arising whilst in the group. | Losses arising in a subsidiary before it joins the group are not available for group relief for 5 year after joining.

GR. Companies leaving group, relief is only available for losses arising whilst ..., but...

whilst in the group, | but no GR once arrangements for sale are in place.

Due date group relief claim:

12 months after the claimant company's filing date for the A.P. covered by the claim (that is usually 2 years after the end of the A.P.).

Payment for group relief:

The claimant company may pay the surrounding companies for the loss. Any such payment for the group relief is ignored in both companies' CT computations | as long as the amount of payment is no more than surrendered amount itself.

Consortium relief and oversees companies:

Consortium members can be resident anywhere in the world but only a UK resident consortium member can CLAIM or SURRENDER losses. Overseas companies can help to meet the definition.

The maximum consortium loss relief available for surrender is:

The lower of| the RESULTS of the consortium member*| and the consortium members’ % ENTITLEMENT to the RESULTS of the consortium company.

Capital gains group. Transfer of assets automatically take place at no gain/no loss regardless of the...

regardless of the price paid.

Capital gains group. Transfer of assets. Transferee company takes over asset at cost plus...

plus indexation to date of transfer.

Capital gains group; transfer of assets. Degrouping charge is where transferee company leaves the group still owning the asset, within ... years of the...

6 years | of the no gain/no loss transfer.

Capital gains group. Degrouping charge is calculated as gain have arisen, using ... value as proceeds, at date of no gain/no loss transfer.

market value

Capital gains group. Degrouping charge is added to...

to the CONSIDERATION | received by the VENDOR COMPANY selling the shares in the company leaving the group.

Degrouping charge. This additional consideration is ... to be taxable.

unlikely to be taxable (as the company selling the shares is likely to benefit from SSE)

Group ROR is ... for a degrouping gain.

not available

Capital gains group. Reallocation of gains. A joint election can be made to reallocate chargeable gains or allowable losses when an asset is sold...

outside the group.

Capital gains group. Reallocation of gains. The joint election enables:

Group chargeable gains and allowable capital losses to be offset thus maximising the use of capital losses.

Capital gains group. Rollover relief (replacement of business assets). For ROR purposes, all companies within the group are treated as...

as carrying on a single trade.

Capital gains group. Pre-entry capital losses can only be used against:

Gains on OWN ASSETS held at date of joining group. | Gains on new assets acquired from outside group for USE IN BUSINESS.

Capital gains group. Restrictions on trading losses CARRIED FORWARD. Any trading loss that arose before it joined the group cannot be set against this gain if the company:

RECEIVES a gain from the new group, | or MAKES a gain on an asset transferred from the new group within 5 years of the date of changing owners (that is joining the group).

Capital gains group. Transfer of INTANGIBLES. Similar rules as in case of losses, that is tax neutral. Degrouping charge if transferee company leaves the group within ... years.

within 6 years.

Capital gains group. Transfer of intangibles. Degrouping charge ... be allocated to another group member.

can be allocated

Capital gains group and transfer of intangibles. When applying SSE always remember about...

ignoring the degrouping charge! If SSE applies to the share disposal, there will be no a degrouping charge. Application of SSE is automatic!

Capital gains group. Assets subject to stamp duty and SDLT ... transferred between group members.

can be transferred (as an exempt transfer).

Capital gains group. Stamp taxes. If the transferee company leaves the group within ... years the duty is payable.

3 years.

Group questions. Alternative to GR:

carrying back (after current period relief), as this can generate a repayment.

Group reliefs stop when ... are in place.

when sales arrangements are in place. If mid-year, time apportion needed.

Sale of trade assets within 75% group. Trade losses can be...

can be transferred with the trade; | can be used against future total profits.

Sale of trade assets within 75% group. Capital allowances.

Assets will be transferred at TWDV. | No BC/BA for transferor. | No FYA or AIA for transferee.

Sale of trade assets within 75% group:

Assets pass as usual at no gain/no loss.

Sale of trade assets within 75% group - if NOT capital gains group treatment:

Capital gains or losses will arise on chargeable assets sold.

Transfer pricing. The advantages company must... | The other company can...

must increase its taxable profits to reflect an arm's length price. | can reduce its taxable profits by a corresponding amount if it is UK-resident.

Transfer pricing. Special rules apply where the SENDING COMPANIES involved are large (ALWAYS) or medium sized under limited circumstances.* Rules apply if:

Small or medium company is overseas company in non-qualifying territory (no DTR agreement).*

Transfer pricing. Special rules do NOT apply if:

S_M sends to UK S_M. | or S_M sends to overseas company in qualifying territory (DTR agreement exists).

VAT group registration membership conditions:

Voluntary possibility. | By any UK company under COMMON CONTROL. | Non-corporate entities may form a VAT group if they are the controller of a group of companies and have a UK trade.*

Consequences of VAT Group registration.

Only one VAT return. | Representative member responsible for accounting. | AAS and FRS not available. | CAS applied to whole group. | Joint and several group VAT liability for all members. | Intra-group sales without VAT.

When considering to explain whether or not a company should be included in a VAT group special attention is required for:

Company making zero-rated supplies (exclude if in monthly repayment position to maintain CF advantage). | Companies making exempt supplies (inclusion in group will make the group partially exempt)*.

Company has 16 months period of account. What are due dates for submission of returns?

12 months after the end of the long period of account for BOTH returns (for the first 12 months AP and the balance of the time). | Note that there are two separate payment days (9 months and 1 day after each end).

What is a tax treatment when company sells a subsidiary with a loss or gain?

The sale will be covered by SSE*, accordingly there will be no relief for gain on the disposal of the shares. Capital losses are disallowable.

Pre-entry capital loss methods of utilisation:

Pre-entry loss is restricted so it can only be offset against loss on disposal of assets owned before joining the group | or bought subsequently from unconnected persons for use in its own business.

Large company spend £169,000 for RaD. Calculate the ATL credit:

£21,970.

Large company spend £169,000 for RaD and has total taxable profits of £1,675,000. Calculate the total amount of C.T. saved by claiming RaD relief:

£49,906 of C.T. saved in total.

Advantages of acquisition of company by company owned by individual rather than by this individual personally:

Assets are transferred within a group take place on no gain no loss basis. | Trading losses can be transferred. | Capital gains can be transferred. _| Land, buildings and fixed machinery used in business are qualifying assets for rollover relief purposes.

Disadvantages of acquisition of company by company owned by individual rather than by this individual personally:

C.T. instalment threshold is reduced. | Only one AIA for the group*.

Amortisation of goodwill in C.T. context:

Amortisation of goodwill disallowable for C.T. purposes. Any amortisation charged in the accounts must be added back for tax purposes.

Amortisation of patent acquired from capital gains group member C.T. treatment:

Amortisation charge must based on original price paid, not the price of internal transfer.

Transfer pricing concern the ... companies.

connected companies

Transfer pricing in qualified territories context:

When double tax treaty exist then transfer pricing rules do not apply.

The thin capitalisation rules aim:

to stop UK companies from getting excessive tax relief on interest. It occurs usually because they received a loan from a related party that exceeds the loan an independent lender would be prepared to lend. The rules ensure that the excess is disallowed.

An overseas resident company ... transfer assets at no gain, no loss within a capital gains group.

cannot