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Standfast Corporate Underwriters Ltd (TC3322)
The taxpayer company was a loss-making corporate Lloyd’s underwriter owned by a consortium until one of the consortium members acquired it as a wholly owned subsidiary.
The taxpayer sought to surrender, by means of a group relief claim, underwriting losses deferred by elections made under FA 2000, s 107(4).
HMRC refused on the basis the anti-avoidance provision FA 1994, s 227A, “Restriction of group relief”, applied.
The First-tier Tribunal said s 227A had to be interpreted in line with its intended purpose, which was to prevent companies acquiring tax losses from underwriters with which they had no previous relationship.
The judge agreed with the taxpayer that an earlier relationship had existed between the transferor and transferee of the losses. The group relief continuity condition in s 227A(1) was satisfied regardless of the fact the consortium relationship had become a group one.
The taxpayer’s appeal was allowed.
