LAM15150 | Excess expenses, losses and deficits: Group relief – a brief summary

LAM15000 to LAM15140 briefly summarises how excess expenses, losses and deficits can be utilised within a life insurance company including relevant rules on the order of set-off.

Full guidance on group relief is at CTM80100.

Subject to the specific rules on the order of set-off, excess expenses, losses and deficits can also be surrendered to other group companies by way of group relief, except for the following BLAGAB items:

• excess management expenses

• non-trade deficits (loan relationships and derivative contracts)

• business property losses

BLAGAB trade losses can be surrendered as group relief despite BLAGAB trade profits themselves not being subject to Corporation Tax (FA12/S125).

The set-off of excess expenses, non-trade property business losses, non-trade losses on intangible fixed assets is subject to the rule in CTA10/S105 that only amounts in excess of the ‘profit-related threshold’ can be surrendered (see CTM80142). In determining the profit-related threshold the policyholders’ share of I-E profits is disregarded (FA12/S125).

Life insurance companies can also claim group relief surrendered by group companies against their total profits, subject to the exception which prohibits group relief being set off against I-E profit taxed at the policyholder rate.

After 1 April 2017 it is possible to surrender carried forward losses as group relief LAM15200.

BLAGAB trade losses carried forward must first be used against the BLAGAB trade profit of the period CTA10/S188BB (with the maximum set-off determined as in LAM15210). Any unrelieved losses are then available to surrender as group relief. LAM15040 includes further details of the consequences of surrendering a BLAGAB trade loss on the BLAGAB management expenses of the period.

A company may only claim or surrender group relief for carried-forward losses once it has used its own losses as far as possible. There are limits set on the maximum relief it can claim for carried forward losses (LAM15200). This applies to group relief for carried-forward losses as well as to the company’s own losses carried forward. A company cannot use group relief for carried-forward losses to obtain any additional relief beyond the amount permitted by the restriction (CTA10/S269ZD(3)(j)) (see CTM82010).