Revenue Note for Guidance

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Revenue Note for Guidance

422 Corresponding accounting periods

Summary

This section defines a claimant company’s corresponding accounting period as one which falls wholly or partly within the accounting period of the surrendering company and provides for an appropriate restriction by apportionment on a time basis where periods do not coincide.

Details

(1) An accounting period of a claimant company falling wholly or partly within an accounting period of the surrendering company is to correspond to that accounting period.

(2) An appropriate restriction of group relief where periods do not coincide applies. In such a case the relief is limited to the lower of —

  • the amount that may be set off against total profits under section 420, set off against income specified in section 420A(3) or which may reduce the relevant corporation tax under section 420B(3), as the case may be, apportioned on a time basis (the apportionment is computed by reference to the length that the common period bears to the whole of the length of the surrendering company’s accounting period), and
  • the amount of the total profits under section 420, the income specified in section 420A(3) or relevant corporation tax under of section 420B(3), as the case may be, against which the amount, referred to above may be set off, apportioned on a time basis (the apportionment is computed by reference to the length that the common period bears to the whole of the length of the claimant company’s accounting period).

Example 1

Company A has a loss of €100,000 for its accounting period of 12 months to 31 December, 2002.

Company B has a profit of €80,000 for its accounting period of 12 months to 31 March, 2003.

The loss which A can surrender is limited to so much of the loss, €100,000 as is apportionable to the common period, (the 9 months to 31 December, 2002) namely —

9/12 × 100,000 = 75,000.

The profits of B against which the surrendered loss can be set off is limited to so much of its profits, €80,000, as is apportionable to the common period, namely —

9/12 × 80,000 = 60,000.

The amount on which group relief can be given is therefore €60,000 only.

If B’s profits were €120,000, the amount apportionable to the common period would be 9/12 × €120,000 = €90,000, and the amount to be relieved would be €75,000.

Example 2

Company A has a Case I loss of €110,000 for its accounting period of 12 months to 31 December, 2024.

Company B has Case I income of €75,000 for its accounting period of 12 months to 30 June, 2025.

The Case I loss which A can surrender is limited to so much of the Case I loss, €110,000 as is apportionable to the common period, (the 6 months to 31 December, 2024) namely —

6/12 × 110,000 = 55,000

The Case I income of B against which the surrendered loss can be set off is limited to so much of its Case I income, €75,000, as is apportionable to the common period, namely —

6/12 × 75,000 = 37,500

The amount on which group relief can be given is therefore €37,500 only.

If B’s Case I income was €150,000, the amount apportionable to the common period would be 6/12 x €150,000 = €75,000, and the amount to be relieved would be €55,000.

Relevant Date: Finance Act 2024