CFM35650 | Loan relationships: consortia companies and impairment: amount of restriction: example

Example: restriction: net consortium debit

Porwin Ltd is a consortium company owned

• 50% by Ulla (South) Ltd

• 50% by Rewdon Manufacturing Ltd.

Ulla group

Ulla (South) Ltd and Ulla (North) Ltd are members of the Ulla group of companies.

Year 1

Ulla (South) Ltd lends Porwin Ltd £30,000. Ulla (North) lends it £60,000. Ulla plc lends it £100,000 and writes this down by £50,000. This is an impairment loss.

The net consortium debit is £50,000.

Year 2

Ulla (South) Ltd writes down £20,000 of its loan. Ulla (North) Ltd writes down £40,000, while Ulla plc reduces its provision for impairment by £15,000.

The net consortium debit for the Ulla group in Year 2 is

Rewdon group

Rewdon Manufacturing Ltd is a member of the Rewdon group.

Year 1

In this year, Rewdon Manufacturing Ltd made a loan of £100,000 to Porwin Ltd. Rewdon Manufacturing Ltd has written it down to £40,000, charging an impairment debit of £60,000. No other member of the Rewdon group has made a loan to Porwin Ltd.

The net consortium debit for the group for this year is £60,000.

Year 2

There were no impairment losses or reversals.

The amount of the group relief restriction

The amount of restriction to impairment debit and release debit {#}hinges on the group relief that each consortium member, or members of its group, claims from the consortium company.

So if, in Year 1, Porwin Ltd (owned 50% by Ulla (South) Ltd and 50% by Rewdon Manufacturing Ltd) has losses of £102,000 available to surrender, the maximum amount of group relief that the Ulla group can claim, under CTA10/S143, is the lesser of

• 50% of the loss available to surrender (£51,000)

• the amount of total profits as reduced by any other relief.

The same rules apply to the Rewdon group.