Revenue Note for Guidance

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Revenue Note for Guidance

420A Group relief: relevant losses and charges


This section places a ring-fence on the offset of losses under section 420 in a group relief context. Under section 420 losses incurred in an accounting period by a company which is a member of a group can be offset against profits of a fellow group company for a corresponding period.


(1) The terms “relevant trading income” and “relevant charges on income” have the meanings set out in section 243A.

(2) The term “relevant trading loss” means trading losses incurred by a company in an accounting period other than so much of the loss as is incurred in an excepted trade (i.e. a trade the income from which is taxable at the 25 per cent rate) and any loss which is ring-fenced under the leasing ring-fence rules set out in section 403(4) or would be so ring-fenced but for section 403(8). Section 403(8) specifically provides that IFSC and Shannon leasing companies are not subject to the ring-fence rule in section 403(4). Instead, they are subject to their own ring-fencing rule under the certificate given to them by the Minister for Finance. The definition of “relevant trading losses” clarifies that any leasing losses of such companies may not be off-set under section 420A against other income. This is achieved in paragraph (b) which states that such a loss does not include any loss that would be ring-fenced under section 403(4) if section 403(8) had not been enacted.

The offset of trading losses under group relief rules does not apply in the case of relevant trading losses.

(3) Instead, such losses may be offset against certain income of a fellow group company for its corresponding accounting period as reduced by any charges or losses offset under sections 243A and 396A. The income concerned is:

  • relevant trading income,
  • income of a trade of non-life insurance, reinsurance and investment income of a life assurance company which is attributable to its shareholders, and
  • foreign dividend income which is chargeable at the 12½ rate of tax under section 21B.

(3)(b) The offset under this section does not apply to losses incurred in a trade the income from which is chargeable to tax under case III. In addition, a loss may not be offset against profits of a life assurance company that are attributable to policyholders/annuitants.

(4) Group relief under this section is to be set off after allowing trading losses brought forward under section 396 but before terminal loss relief carried back under section 397.

(5) In the case of a consortium relief, only a fraction (reflecting the member’s interest in the consortium) of a relevant trading loss or relevant trading charges may be offset.

Relevant Date: Finance Act 2020