The procedures required to appoint a nominated company to a corporate group and for that company to submit a loss carry-back allocation statement to HMRC under the extended corporation tax loss carry-back provisions have been set out in regulations. ICAEW’s Tax Faculty explains the details.
The Corporation Tax (Carry Back of Losses: Temporary Extension) Regulations 2021, SI 2021/704 set out the details for how groups should make claims under the extended corporation tax loss carry-back provisions (extending the ability to carry back trading losses from 12 months to three years) in Finance Act 2021.
A recap of the rules and concepts
The loss carry-back extension applies to trading losses incurred in accounting periods ending in the period 1 April 2020 to 31 March 2021 and trading losses incurred in accounting periods ending in the period 1 April 2021 to 31 March 2022.
A de-minimis claim is a claim of £200,000 or less. Where groups contain companies making non-de-minimis claims, an overall £2m group-level limit applies per accounting period.
For the purposes of these rules, a 2020 group means two or more companies that are in a group at the end of 31 March 2021 and a 2021 group means two or more companies that are in a group at the end of 31 March 2022. A group is broadly an ultimate parent company and all its effective 75% subsidiaries (defined at s269ZZB, Corporation Tax Act 2010).
Where groups contain companies making non-de-minimis claims, the group is required to submit a loss carry-back allocation statement to HMRC to allocate the £2m cap among group members. These latest regulations set out the details to be submitted and who should make the statement.
Loss carry-back allocation statements
Each 2020 group with companies making non-de-minimis claims must submit a loss carry-back allocation statement that shows the extended loss carry-back claims that members of the group have made in respect of a loss incurred in an accounting period that ends between 1 April 2020 and 31 March 2021. The statement must be received by HMRC before 31 March 2023.
Similarly, each 2021 group with companies making non-de-minimis claims must submit a loss carry-back allocation statement to HMRC showing claims for losses incurred in accounting periods ending between 1 April 2021 and 31 March 2022 by 31 March 2024.
The loss-carry-back allocation statement must be in writing and:
- identify the ultimate parent of the group;
- list the group members;
- list de-minimis claims made detailing the name of the company and the amount of the claim;
- state the total amount of de-minimis claims;
- list non-de-minimis claims made detailing the name of the company and the amount of the claim;
- state the total of de-minimis and non-de-minimis claims (subject to the overall £2m cap).
The statement must be submitted by a nominated company on behalf of the group and be signed by the appropriate person for that company. There are three ways in which a company may be nominated:
- by the ultimate parent company of the group;
- by all of the group members; or
- by any two members of the group but with the consent of the “appropriate person” of the ultimate parent company. Consent is deemed to have been given if the ultimate parent does not object within seven days of its appropriate person being notified in writing of the companies’ intention to make a nomination.
All nominations must be made in writing and signed by an “appropriate person”. The appropriate person is defined as a proper officer of the company or someone with the express, implied or apparent authority of the company to act on its behalf.
Amendments to loss carry-back statements
Where an allocation statement has been submitted to HMRC, it may be amended by notice in writing to HMRC to reflect the specification of any further or amended non-de-minimis claims made by any member of the group. The amended statement must be received before 31 March 2023 for 2020 statements and 31 March 2024 for 2021 statements.
Where an allocation statement has been submitted to HMRC and a subsequent de-minimis claim to extended loss carry back is made, the statement must be amended by notice to HMRC within 30 days of the date on which the further claim is made.
In either case (amendment of the statement due to either a further de-minimis or non-de-minimis claim) the notice must be signed by the appropriate person of the nominated company.
Where a statement has been amended as a result of a subsequent de-minimis claim, the nominated company must ensure that it does not breach the £2m group carry-back limit and must do so by reducing the size of an existing non-de-minimis claim. If a statement does not comply with this £2m limit then an officer of HMRC may amend the statement as the officer sees fit by written notice to the nominated company, the ultimate parent company or both.
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.