Corporation Tax Act 2010 section 188EJ

Condition 3 or 4: surrendering company not controlled by claimant company etc.

Section 188EJ is an anti-avoidance rule that reduces group relief for carried-forward losses by 50% where arrangements have been put in place to prevent a consortium member (or link company) from controlling the surrendering company, and those arrangements form part of a tax-motivated scheme.

• Where a claim for group relief for carried-forward losses is based on consortium condition 3 or 4, this section applies if arrangements are in place during any part of the overlapping period that prevent the claimant company (or link company) — alone or with other consortium members — from controlling the surrendering company.
• The arrangements are caught only if, but for their existence, the claimant or link company (alone or with other consortium members) would actually control the surrendering company, and the arrangements form part of a scheme whose main purpose (or one of whose main purposes) is to secure a tax advantage under this chapter.
• Where the section applies, the surrenderable amount for the overlapping period is reduced to 50% of what it would otherwise be, effectively halving the relief available on the claim.
• The overlapping period and the concept of tax advantage are defined elsewhere in the Act, but the practical effect is that artificially structured consortium arrangements cannot be used to obtain full group relief for carried-forward losses.