420A Group relief: relevant losses and charges

Summary

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.

Details

(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).

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 2024