RSS logo
Home > Our services > Tax > Public interest entities > Corporation tax – changes to consortium relief

Audit & assurance

Tax


Financial Advisory Services

Consulting

Outsourcing

International desks

 

Corporation tax – changes to consortium relief

Two changes have been announced in the Emergency Budget to the group relief available to consortia of companies.

Foreign link companies

The first change will only affect a comparatively small number of companies, but will be significant for those that benefit. A “Link” company for consortium relief may now be resident in any EEA country, not just the UK.

This is likely to be particularly beneficial where there is a loss-making UK company which is a member of an overseas group held by a consortium. Any UK company in the same group as a member (i.e. shareholder) of the consortium can claim that member’s share of the UK consortium company’s losses and reduce their UK tax liability accordingly. This may allow otherwise unutilised UK tax losses to be extracted by joint venture partners, where they were previously unable to do so.

The price that will be paid to the UK consortium company for use of its losses depends on negotiation. Frequently profitable groups will “buy” the previously inaccessible losses at a rate lower than the tax liability being extinguished.

It may have been possible for consortia to have made this claim in any case on the basis of case law.

Additional restriction in calculation of share of loss

The second change is likely to affect a larger number of consortia. It will also , where applicable, narrow the scope of the relief by restricting the amount of losses that companies could claim from (or surrender to) a consortium company by reference to their percentage voting rights, where this is less than any existing measure of participation in the joint venture.

This change will be detrimental to consortia where voting rights are held disproportionately to share capital, perhaps because of the existence of multiple classes of share.

If you feel that your company is likely to be affected by the above, you should take professional advice as soon as possible, preferably before the new regime takes effect which will be for the first accounting period starting after the next Finance Act.

Contact us