Limit placed on consortium relief

A consortium of five shareholders Devin Eagle CKI1 CKI2 and CKI3 owned UK Power Networks Holdings Ltd of which the taxpayers were trading subsidiaries. The CKI companies held 74.6% of the voting rights. The taxpayer companies made profits and claimed consortium relief (CTA 2010 s 130) on losses made by the Hutchinson companies – ultimate owners of the consortium shareholding companies.

The issue was whether CKI3 had been deprived of its voting power so that the CKI companies no longer held 74.6% of the voting rights in which case CTA 2010 s 146B applied to limit relief by 50%.

The First-tier Tribunal decided in favour of the taxpayers so HMRC appealed.

The Upper Tribunal noted that s 146B(2)(b) applied when arrangements were in place that enabled ‘a person to prevent the link company either alone or together with one or...