June Budget – Consortium relief
Two changes to the rules for companies claiming consortium relief are to be introduced.
One of the new measures will extend the consortium relief rules which allow a member of a consortium to transfer its share of the consortium’s unused losses to another member of its group, known as the‘link company rule’.
Prior to this announcement, the link company had to be a UK resident company. With effect from the date the new legislation is published any company established within the EEC can be a link company.
The second change affects the maximum amount of losses that can be claimed. This is currently determined by the lowest result from three tests; the percentage of ordinary share capital held, the percentage of profits to which the company is entitled and the percentage of assets to which the company would be entitled on a winding up.
A fourth test is to be added based on the on the proportion of voting rights and the extent of control the member holds in the consortium.