Corporation Tax relief may be available when a company or organisation makes a trading loss. Companies that are eligible for group relief can transfer losses and certain other deficits to companies within the same group by means of Group or Consortium Relief. The use of group relief allows losses arising in the accounting period to be surrendered to a group company for that period. 

Companies attempting to either surrender or claim losses for Group Relief or Group Relief for carried forward losses, must meet the required conditions. For companies to be members of the same group, one company must be a 75% subsidiary of the other, or both must be 75% subsidiaries of a third company. The definition of ‘75% subsidiary’ requires one company to have direct or indirect beneficial ownership of at least 75% of the ordinary share capital in another. There are also further qualifying tests that may apply for group relief purposes, and this can be a complex area. 

Under Section 99 – Corporation tax Act 2010 the following losses (when qualifying) can be surrendered and claimed as group relief:

• a trading loss 
• a capital allowances excess 
• non-trading deficit on loan relationship 
• amounts allowable as qualifying charitable donations 
• a UK property business loss 
• management expenses 
• a non-trading loss on intangible fixed assets 

Film tax relief (FTR) can increase the amount of expenditure that is allowable as a deduction for tax purposes or, if a company makes a loss, can be surrendered for a payable tax credit. To qualify for relief, films must be intended to be shown commercially in cinemas and at least 10% of the core costs must relate to activities in the UK. In addition, the film must be certified as British, either by passing a cultural test or under an agreed co-production treaty. The FTR allows qualifying companies to claim a payable cash rebate of up to 25% on UK qualifying expenditure.

One issue that has arisen since the FTR was first introduced, and accelerated during the pandemic, is the fact that more films are released directly to video on-demand services. This creates an issue for claiming FTR as one of the conditions is that the film must be intended for release to the public in cinemas. It is also not currently possible to retroactively qualify for high-end TV tax relief (HETV) because that would only be possible at the outset of filming.

The government is now proposing to allow claimants to continue claiming FTR even if the film is not released in cinemas but would otherwise qualify for the HETV. The new measure is expected to come into force from 1 April 2022.

Any assets or rights (but not liabilities) remaining in a company at the date of dissolution will pass to the Crown as ownerless property. This happens under what is known as 'bona vacantia' which literally means vacant goods. The bodies that deal with bona vacantia claims vary across the United Kingdom, but they all ultimately represent the Crown.

The final step in bringing a company to a legal end is when the company is dissolved. Payments received after a company has dissolved are not bona vacantia as they are not an asset of the company immediately prior to dissolution. HMRC’s pursuit of a company debt should also cease as soon as the company is dissolved.

In fact, HMRC’s internal manuals state that:

Any payments voluntarily made by an ex-official after the company is dissolved (i.e., no action was taken to recover the debt after the company was dissolved) should be used in satisfaction of any company debt arising for a period before the date of dissolution. If no such debt exists, or there is an excess of funds, then steps should be taken to send the overpayment back to the sender. Any sums that cannot be returned should be allocated to Permanent Overpayments.

Under qualifying circumstances, Corporation Tax (CT) relief is available where a company makes a trading loss. The trading loss can be used to claim CT relief by offsetting the loss against other gains or profits of a business in the same or previous accounting period. The loss can also be set against future qualifying trading income.

There are however restrictions on ‘loss-buying’. These are situations where a person buys a trading company wholly or partly for its unused trading losses rather than solely for the inherent value of its trade or assets. The new owner usually seeks to introduce new activity into the company to keep its entitlement to loss relief.

The legislation governing this area can result in all the company’s unused carried- forward trading losses being cancelled where either:

• within any specified period, there is both; a change in the ownership of a company, and a major change in the nature or conduct of a trade carried on by the company,

or

• there is a change in ownership of a company at a time when the scale of its trading activities has become small or negligible.

For accounting periods beginning on or after 1 April 2017, the specified period is 5 years beginning no more than 3 years before the change in ownership occurs.

Goodwill is rarely mentioned in legislation. Most people would settle on a simple definition which would be based on the ‘extra’ value of a business over and above its tangible assets.

In the vast majority of cases when a business is sold a significant proportion of the sale price will be for the intangible assets or goodwill of the company. This is essentially a way of placing a monetary value on the business's reputation and customer relationships. Or as HMRC say in their guidance, in accounting terms, purchased goodwill is the balancing figure between the purchase price of a business and the net value of the assets acquired. Valuing goodwill is complex and there are many different methods which can be used and that vary from industry to industry.

The Corporation Tax relief restriction rules for certain acquisitions of goodwill and relevant assets changed on 1 April 2019.

Businesses can now claim Corporation Tax relief on purchases of goodwill made on or after 1 April 2019 if the:

• goodwill and relevant assets are purchased when you buy a business with qualifying intellectual property (IP)
• business is liable to Corporation Tax
• relevant assets (including goodwill) are included in the company accounts

If relief is available, it is at a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased. Relief is given yearly until the limit is reached and a claim is made using the Company Tax Return.