CTM05190 | Corporation tax: restriction on relief for carried-forward losses: group deductions allowance

CTA10/S269ZS

The group deductions allowance is allocated by the nominated company (CTM05180) on the group allowance allocation statement (GAAS) (CTM05200).

The group deductions allowance is the maximum amount of deductions allowance that the nominated company can allocate on the statement it submits. This is calculated by reference to:

• the length of the nominated company’s accounting period, and

• the proportion of that accounting period for which the nomination had effect.

Nomination in effect throughout the accounting period

Where the nominated company has a 12 month accounting period, and the nomination was in effect throughout that accounting period, then the group deductions allowance is £5 million (CTA10/S269ZS (2)).

If the nominated company's accounting period is less than 12 months, and the nomination had effect throughout that accounting period, the group deductions allowance for that period is proportionally reduced (CTA10/S269ZS (4)).

Nomination in effect for part of the accounting period

If a group's nomination takes effect or ceases to have effect part way through the nominated company's accounting period, and that period is 12 months in length, the group deductions allowance for that period is:

DN / DAC x £5,000,000, where:

• DN is the number of days in the nominated company’s accounting period for which the nomination has effect, and

• DAC is the total number of days in the nominated company’s accounting period.

(CTA10/S269ZS (3))

If the nominated company's accounting period is less than 12 months, then the company should perform the same calculation as above, but should reduce the result proportionally, to reflect the shorter length of its accounting period (CTA10/S269ZS (4)).

Example

Company N has a seven month accounting period, beginning 1 January 2019 and ending 31 July 2019. It becomes the nominated company for a group, and the nomination takes effect on 1 March 2019.

The nomination was in effect for 153 days of company N’s accounting period.

The accounting period had a total length of 212 days.

DN / DAC x £5,000,000 gives:

153/212 x £5,000,000 = £3,608,491.

This is proportionately reduced to reflect the fact that the accounting period was only seven months, or 212 days:

212/365 x £3,608,491 = £2,095,891.

The group deductions allowance is £2,095,891. This is the maximum amount that company N can nominate on the GAAS it submits in relation to its accounting period ending 31 July 2019.