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Corporation Tax LiabilitiesSection BCorporation TaxGroupsGroup Relief

ACCA · Question 28 · Corporation Tax Liabilities

Section B: Case 3 - Meridian Logistics Plc

Scenario: Meridian Logistics Plc is the parent company of a cross-border shipping and warehousing group. Meridian Logistics Plc owns 80% of the ordinary share capital of Alpha Ltd. Alpha Ltd owns 90% of the ordinary share capital of Beta Ltd. Meridian Logistics Plc also directly owns 60% of Gamma Ltd. All companies are UK resident and prepare accounts to 31 March.

Question: For the year ended 31 March 2024, Meridian Logistics Plc has a trading loss of £500,000. Alpha Ltd has Taxable Total Profits (TTP) of £300,000.

What is the maximum amount of loss that Meridian Logistics Plc can surrender to Alpha Ltd via group relief?

Answer options:

A.

£500,000

B.

£300,000

C.

£240,000

D.

£0

How to approach this question

Determine the maximum group relief: it is the lower of the available loss and the available profits. Do not pro-rate for minority interests.

Full Answer

B.£300,000✓ Correct
Meridian and Alpha form a 75% group relief group. The maximum amount of group relief that can be claimed is the lower of: 1. The surrendering company's available loss (£500,000) 2. The claimant company's available profits (£300,000) Therefore, the maximum claim is £300,000. Importantly, even though Meridian only owns 80% of Alpha, the loss surrender is not restricted to 80%. Once the 75% threshold is met, 100% of the losses can be surrendered up to the profit limit.

Common mistakes

Restricting the loss surrender to 80% of the profits because of the minority shareholder.
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