When a UK group of companies has profits in some entities and losses in others, group relief lets the losses move to where they can be used. The rules sit in CTA 2010 Part 5 and underpin much of how corporate groups manage their effective tax rate. For SMEs and mid-market groups, group relief is often left on the table because directors do not know it is available, or used incorrectly because the underlying group definition is misunderstood.
What counts as a "group" for corporation tax
For most group relief purposes, a 75% group exists where one company owns at least 75% of the ordinary share capital of another, directly or indirectly, and has rights to at least 75% of the distributable profits and at least 75% of the assets on a winding-up. Both companies must also be UK resident or within the UK corporation tax net (for example, a UK PE of a non-resident company).
This is the basic definition for current-year group relief. For consortium relief, the threshold is lower: a consortium-owned company must be owned 75% by consortium members, no one of which owns less than 5% and no one of which owns 75% (in which case it would be a group). For capital gains group relief (rolling losses or no-gain-no-loss transfers), the threshold remains 75%.
Current-year group relief
Current-year group relief lets a company surrender certain unrelieved amounts (trading losses, non-trading deficits on loan relationships, excess management expenses, excess capital allowances on plant in lessors' hands, and certain other items) to another company in the same group, which then deducts the amount from its taxable profits.
The surrendering company must have actually incurred the loss and have no other use for it in the same period. The claimant company must have profits to use it against. The claim is made in the claimant's corporation tax return and must be matched by a consenting notice from the surrenderer. Claims can be amended within the standard amendment window (typically twelve months after the filing deadline).
Group relief for carried-forward losses
Reforms in 2017 brought carried-forward losses within group relief for the first time. Losses arising on or after 1 April 2017 that are carried forward can be surrendered to other group members against future profits, subject to the loss restriction rules (the 50% restriction above the GBP 5 million deductions allowance for groups). Pre-April 2017 losses generally cannot be group-relieved.
The interaction between the loss restriction and group relief is complex. The deductions allowance is shared across the group on a basis the group nominates, and groups need to file an allowance allocation statement each year if they want to share differently from the default split.
Consortium relief
Consortium relief allows a similar transfer of losses between a consortium-owned company and its consortium members, scaled by ownership share. It is less commonly used than group relief but is the right tool where companies are owned jointly by several unrelated parties, each with stakes between 5% and 75%.
Capital gains groups and no-gain-no-loss transfers
Capital gains groups (also using the 75% threshold but with some differences in definition) let companies transfer chargeable assets between members on a no-gain-no-loss basis under TCGA 1992 s171. This is an automatic relief that prevents tax leakage on intra-group restructurings. The recipient inherits the original base cost and acquisition date.
The "degrouping" rules can claw back the relief if the receiving company leaves the group within six years while still owning the asset. The degrouping charge attaches to the leaving company and adjusts the gain on its disposal, but in practice can be transferred to other group members by election.
Common errors and traps
The most common mistakes we see in mid-market groups include groups where the parent is not UK-resident and therefore breaks the chain for some relief categories, mid-year acquisitions or disposals where the company is only in the group for part of the period and the relief must be time-apportioned, and stranded losses in companies that have ceased to trade where carried-forward relief becomes restricted under the change-of-ownership rules.
The change-of-ownership rules under CTA 2010 Part 14 are the silent killer of losses. A major change in the nature or conduct of trade within five years before or three years after a change of ownership can restrict carried-forward losses. Restructurings that look like rationalisation can trigger the rules unexpectedly.
Practical compliance
Group relief claims and surrenders are made through corporation tax returns. The consenting notice can be a simple board minute or formal letter, but it must be in place to support the claim. HMRC routinely requests evidence on enquiry. Groups should maintain a "tax pack" showing the 75% chains for each relevant entity, especially after restructuring or new acquisitions.
Cross-border considerations
UK group relief is largely a UK-resident concept. Losses of overseas group members are not generally available, although the rules in CTA 2010 Part 5 Chapter 3 permit limited surrenders from EEA-resident companies in narrow circumstances following Marks & Spencer and subsequent case law. For most mid-market groups, this is theoretical relief that rarely applies in practice.
How PushDigits supports group structures
Our tax planning team reviews group structures for relief efficiency, models the use of carried-forward losses against the deductions allowance, and handles change-of-ownership and degrouping analysis. Our annual accounts team prepares group reporting packages and ensures intra-group consistency in tax positions.
If your group has not had a structured tax review in the last three years, book a group tax review or visit our contact page. Reliefs missed are usually irrecoverable once the amendment window closes.