Jurisdiction(s):
United Kingdom

FTT (Tax): Collective link-company entitlements cap consortium relief at 40%; CTA 2010 s146B anti-avoidance halves claim (Eastern Power Networks v HMRC)

Published on: 16 June 2025

Published by a LexisNexis Tax expert

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Article summary

Eastern Power Networks plc and others v HMRC TC/2023/07750–07753

Following a 2010 acquisition, the taxpayer companies became wholly owned subsidiaries of UK Power Networks Holdings Ltd (UKPNH). Within the UK Power Networks group, UKPNH operated as a consortium company. The taxpayers submitted claims to consortium relief relying on losses surrendered by companies with available deficits that sat in a separate corporate group (HW). They aimed to relieve corporation tax by setting those surrendered losses against 74% of each company’s profits. HMRC opened enquiries into the claims and determined that relief was restricted to 20% of the profits, reflecting a 40% entitlement that was then reduced by half under an anti-avoidance restriction. Accordingly, the taxpayers maintained a 74% set-off position, whereas HMRC contended that only a 20% cap applied. The dispute centred on the operation of the consortium relief regime in relation to several entities characterised as ‘link companies’—companies that were both members of a different corporate group from the taxpayers (namely HW) and also a ‘member of the consortium’ (for consortium relief purposes) which owned UKPNH. In the circumstances, three entities satisfied the statutory definition of ‘the link company’...

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