ACCA TX ^UK Syllabus E. Corporation Tax Liabilities - 75% loss group - Past Papers ^{1 / 2}

Group companies
Jump Ltd owns 80% of the ordinary share capital of Hop Ltd and 60% of the ordinary share capital of Skip Ltd.

Hop Ltd commenced trading on 1 August 2014, and for the eight-month period ended 31 March 2015 has taxable total profits of £63,000.

Skip Ltd has been trading for several years and has taxable total profits of £56,000 for the year ended 31 March 2015.

Rates of corporation tax
Jump Ltd, Hop Ltd and Skip Ltd have always paid corporation tax at the small profits rate of 20%, and expect to continue to do so in respect of future profits.

Required:
(iii) Advise Jump Ltd as to the maximum amount of its trading loss which can be surrendered as group relief. (2 marks)

Cairo Ltd runs a business promoting African music. The company’s taxable total profits for the year ended 31 March 2014 were £87,000.

Cairo Ltd has owned 100% of the ordinary share capital of Dakar Ltd since it began trading on 1 December 2012, running a music recording studio. Dakar Ltd’s results for the year ended 30 November 2013 and for the four-month period ended 31 March 2014 are as follows:

For the year ended 31 March 2015, both Cairo Ltd and Dakar Ltd will pay corporation tax at the small profits rate of 20% on their trading profits.

Required:
(i) Advise Cairo Ltd as to the maximum amount of group relief which can be claimed against its taxable total profits of £87,000 for the year ended 31 March 2014.

Note: You are not expected to calculate Cairo Ltd’s corporation tax liability. (4 marks)

(ii) Explain why it is probably beneficial for Dakar Ltd to group relieve its losses to Cairo Ltd rather than offsetting them against its own profits. (2 marks)

Required:
(ii) Calculate the maximum amount of group relief that Greenzone Ltd can claim for the year ended 31 March 2013; (2 marks)