Case Law

In Pilkington v IRC 1982 STC 103 a company (ML) entered into an arrangement with another company (P) to enable capital allowances in respect of a ship which ML was about to purchase to be surrendered to P by way of group relief. A reorganisation took place. It was held the companies were not members of the same group for the duration of the arrangement in question, so the claim for group relief failed.

Where either the profit distribution or asset distribution test cease to be satisfied during an accounting period, group relief as between the two companies concerned may not be availed of from the relevant time. It was held in Shepherd v Law Land plc 1990 STC 795 that the provision has effect only in so long as the “arrangements” in questions subsist, as soon as the arrangements no longer exist, the group relationship which has been treated as broken will be restored.