HMRC has released a policy note on changes to the rules for relief for carried-forward losses changed which are backdated to 1 April 2017 and are designed to simplify the arrangements for claims for group relief
For losses incurred on or after 1 April 2017, groups will be able to claim group relief for carried-forward losses by nominating a company to submit joint amended returns on behalf of other group members. These are known as ‘simplified arrangements’.
HMRC says this measure will reduce the administrative burden on companies by eliminating the requirement to file separate returns for each company and will mirror the existing process for claiming group relief for in-year losses. It will have no effect on the amount of losses that can be claimed.
This will be of particular benefit for groups that consist of a large number of companies and which have multiple group relief allocations that may be subject to numerous changes before being finalised.
Under the proposals the current law will be amended by the Corporation Tax (Simplified Arrangements for Group Relief) (Amendment) Regulations 2018. Section 18 and Schedule 4 of the Finance (No 2) Act 2017 introduced legislation that reforms the use of carried-forward losses enabling companies to surrender such losses between group companies.
Simplified arrangements for group relief for in-year losses exist to allow an authorised company to act on behalf of authorising companies within a group to make group relief claims and surrenders. The authorised company submits a written statement consolidating the group relief claims and surrenders information required to amend the relevant company tax returns.
The amendments to the Corporation Tax (Simplified Arrangements for Group Relief) Regulations 1999 extend the current simplified arrangements for group relief to incorporate carried-forward losses.
The expected one-off costs of the loss reform measure as a whole are between £20m to £25m. The ongoing costs are expected to be £3m to £5m.
HMRC says enabling companies to enter into simplified arrangements was taken into account when the administrative cost of the loss reform was calculated so introducing these regulations is expected to have no additional impact on businesses admin burdens and costs.
However, if these regulations are not introduced, there could be an additional admin burden cost to businesses as groups would not able to enter into simplified arrangements for claims of group relief for carried-forward losses.