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i have a big confusion in what acca study hub material has stated . they hv stated the follwing reliefs
“Current period adjusted trading losses;
Brought forward trading losses, provided they cannot be used against the surrendering company’s own total profits;
Unrelieved current period property business losses
Brought forward property business losses, provided they cannot be used against the surrendering company’s own total profits;
Unrelieved qualifying charitable donations (i.e. where they exceed total profits) – these are treated as surrendered prior to unrelieved property business losses.
Note the word ‘unrelieved’ in respect of QCDs and property business losses. Qualifying charitable donations and property business losses are only unrelieved if they exceed the surrendering company’s other profits, before any loss reliefs (i.e. they must be set off against the surrendering company’s total profits before any remainder can be group relieved).”this below is the example they’ve given
Black Ltd has one 75% subsidiary, White Ltd. Both companies have an accounting reference date of 31 March. The results for each company for the two years ended 31 March 2024 and 31 March 2025 are:
Year ended 31 March 2024 Year ended 31 March 2025
£ £
Black Ltd
Trading profit 40,000 85,000
Property business income 3,500 5,000
White Ltd
Trading profit/(loss) (90,000) 20,000
Property business income 4,500 4,500
Year ended 31 March 2024
• White Ltd can offset £4,500 of loss against the property business income and surrender £43,500 (40,000 + 3,500) of its losses to Black Ltd.
• Losses of £42,000 (90,000 – 4,500 – 43,500) are carried forward to the year ended 31 March 2025.
Year ended 31 March 2025
• White Ltd must initially set the carried forward losses against its own total profits of £24,500 (20,000 + 4,500).
• The remaining losses of £17,500 (42,000 – 24,500) can be surrendered to Black Ltd, reducing the company’s taxable total profits to £72,500 (85,000 + 5,000 – 17,500)my question is in the rules they said bf trading loss shld not be offset againt surrendering comp own profits. then y did they do this in the example abve?
It is not compulsory for trading losses brought forward (and property losses brought forward for that matter) to be offset against the surrendering company’s own total profits (as it’s a claim, and the only time that the amount can be chosen rather than having to offset the entire loss as much as possible (as with a current year and a carry back claim)). The point is that brought forward losses can be group relieved BUT ONLY TO THE EXTENT THAT THE SURRENDERING COMPANY CANNOT RELIEVE IT AGAINST ITS OWN TOTAL PROFITS IF A CLAIM WERE MADE, i.e., they can only be relieved if they are excess.
So in the example you give;
White does not need to make the current year claim against its own total profits of £4,500 if it doesn’t want to (for example, if it left unrelieved qualifying charitable donations (QCDs)). It could group relieve the entire amount if the claimant company has sufficient profits to absorb it.
When a loss is brought forward, if the company bringing forward the loss COULD relieve it against its own total profits, then it doesn’t HAVE to make the claim, but even if it doesn’t, it will still restrict the amount that it can surrender to another group company.
So in 2024, the current year claim is made, relieving £4,500 of the loss. A maximum group relief claim is made, relieving £43,500 of the loss to Black, leaving £42,000 of the loss remaining to carry forward.
It cannot group relieve the entire £42,000 as it has to CONSIDER any claim that it could make against its own total profits (£24,500) so the maximum group relief claim is £(42,000 – 24,500) = £17,500.
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