Corporation Tax Act 2010 section 188FA

Payments for group relief for carried-forward losses

Section 188FA deals with the corporation tax treatment of payments made between group companies in connection with the surrender and claiming of carried-forward losses.

• Where two group companies agree on the losses to be surrendered, and the claimant company pays the surrendering company an amount not exceeding those agreed losses, special tax treatment applies
• Any such payment is ignored when calculating either company's profits or losses for corporation tax purposes
• The payment is also not treated as a distribution for corporation tax purposes, so it does not give rise to any dividend-type tax consequences
• These rules ensure that compensation payments for carried-forward loss surrenders are tax-neutral for both parties involved