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Replies to Queries - Group relief

17 February 2005
Issue: 3995 / Categories:

When a company leaves a group in the course of an accounting period, the profit or loss of the relevant accounting period will be time-apportioned for group relief purposes — see TA 1988,  s 403B. This does not apply if such an apportionment would be unjust or unreasonable.

I am concerned with companies A, B and C. All these companies prepare accounts on a calendar year basis. Company B was wholly owned by A for many years, but was sold to unconnected company C on 1 April 2004. Companies A and C have trading losses for 2004, while company B has a trading profit.

When a company leaves a group in the course of an accounting period, the profit or loss of the relevant accounting period will be time-apportioned for group relief purposes — see TA 1988,  s 403B. This does not apply if such an apportionment would be unjust or unreasonable.

I am concerned with companies A, B and C. All these companies prepare accounts on a calendar year basis. Company B was wholly owned by A for many years, but was sold to unconnected company C on 1 April 2004. Companies A and C have trading losses for 2004, while company B has a trading profit.

A charge under TCGA 1992, s 179 arises on B as a result of degrouping and is deemed to arise on 1 January 2004. It would be advantageous for company A (from the group relief perspective) if the whole of this gain could be allocated to the notional period 1 January 2004 to 31 March 2004, rather than time-apportioning it across the whole of 2004. Is this acceptable, or can the Revenue insist on pro rata time-apportionment in these circumstances?

Readers' views and thoughts would be welcome here.

(Query T16,557)       

Issue: 3995 / Categories:
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