CFM35620 - Loan relationships: consortia companies and impairment: how the restriction works

CTA09/S364

When does Chapter 7 apply?

Chapter 7 sets out rules to ensure that consortia companies cannot, in effect, obtain double tax relief for the same loss.

The rules apply when:

  • there is (or was) a 'relevant consortium creditor relationship', and
  • an impairment loss or a debit for a release of the liability (a ‘release debit’) under the ‘relevant consortium creditor relationship’ is or has previously been brought into account for any ‘group accounting period’.

See the example at CFM35630.

 

Relevant consortium creditor relationship

A 'relevant consortium creditor relationship' is where

  • the lender is a member of a consortium that owns a 'consortium company', or a member of the same group of companies as such a company
  • the borrower is the consortium company or (if that company is a holding company) a subsidiary of that company.

 

Consortium company

A consortium company is a company that falls within CTA10/Part5. It is a company owned by a consortium which is

  • a trading company owned directly by the consortium, or
  • a trading company that is a 90% subsidiary of a holding company owned directly by the consortium, or
  • a holding company owned directly by the consortium.

 

Group accounting period

A group accounting period is defined in CTA09/S370. It is any accounting period of the consortium member

  • beginning on or after 1 October 2002, or
  • corresponding to such an accounting period.

An accounting period of a group member will correspond with that of a consortium member if

  • the two accounting periods coincide, or
  • the consortium member’s accounting period includes more than half of the group member’s accounting period, or
  • the consortium member’s accounting period includes part of the group member’s accounting period, where the rest of the group member’s accounting period doesn’t fall within any accounting period of the consortium member.