Group Relief for Corporation Tax

Group relief lets one company in a group hand over certain losses and other reliefs to another group company, which sets them against its own taxable profits so the group pays less Corporation Tax overall. It is available within a 75% group, meaning one company is a 75% subsidiary of the other, or both are 75% subsidiaries of a third company, measured by ordinary share capital, beneficial entitlement to distributable profits and entitlement to assets on a winding up.

What is group relief?

When companies are owned together as a group, one member can make a loss in the same period that another member makes a profit. Left alone, the loss-making company would carry its loss forward while the profitable company paid tax in full. Group relief removes that mismatch. The company with the loss surrenders it to a fellow group member, which then reduces its own profits by the surrendered amount. The overall tax bill for the group falls, and the relief is given in the same accounting period rather than being locked away until later. If you are new to how the tax itself works, our guide to Corporation Tax explained sets out the basics before you apply group rules on top.

What is a 75% group?

Group relief is only open to companies that form a 75% group. One company is a 75% subsidiary of another when the parent has direct or indirect beneficial ownership of at least 75% of the subsidiary’s ordinary share capital. Two further tests must also be met: the parent must be beneficially entitled to at least 75% of any profits available for distribution, and to at least 75% of the assets available to shareholders on a winding up. A group exists where one company is a 75% subsidiary of the other, or where both are 75% subsidiaries of the same third company.

Because the test looks at economic entitlement and not just the share register, arrangements that strip out rights to profits or assets can break the relationship even where the 75% shareholding looks intact. This is a different threshold from the one that governs associated companies for Corporation Tax, so it is worth keeping the two ideas apart when you plan.

What losses can be surrendered?

A range of amounts arising in the current accounting period can be surrendered to another group member and set against its profits of a corresponding period. The main items are:

• Trading losses of the surrendering company.
• Excess capital allowances that cannot be used against the surrendering company’s own income.
• Non-trading deficits on loan relationships, broadly interest and financing costs that exceed related income.
• Excess management expenses of an investment company.
• UK property business losses.
• Qualifying charitable donations and non-trading losses on intangible fixed assets.

Trading losses, excess capital allowances and loan relationship deficits can generally be surrendered in full. The remaining items can only be surrendered to the extent they exceed the surrendering company’s own profits for the period. The claimant company sets the surrendered amount against its total profits, which can improve its position for marginal relief for Corporation Tax where profits sit between the lower and upper limits.

What about carried-forward losses?

The rules above deal with losses of the current period. Since 1 April 2017 many losses carried forward from earlier periods can also be surrendered as group relief, so a loss trapped in one company’s history can be put to work elsewhere in the group. This flexibility comes with a cap on how much carried-forward loss any company can use.

A company can offset carried-forward losses in full up to a deductions allowance, which is a maximum of £5 million. Above that allowance, carried-forward losses can only reduce remaining profits by up to 50%. For a group, the £5 million allowance is not given to each company separately. It is a single group figure shared among the members as they choose, allocated by a nominated company. In practice this means a large, profitable group cannot wipe out all of its profits with historic losses, but smaller groups whose profits stay under £5 million are unaffected by the restriction.

What is consortium relief?

Consortium relief is a close cousin of group relief for companies that are jointly owned rather than sitting in a 75% group. A company is owned by a consortium when at least 75% of its ordinary share capital is held between them by companies that each own at least 5%. Losses can then flow between the consortium company and its members, but only in proportion to each member’s stake, so the relief available is scaled to the shareholding rather than given in full. The mechanics are more involved than straightforward group relief, and professional advice is sensible where a consortium structure is in play.

How do you claim?

Group relief is claimed through the company tax return of the claimant company. The claim states the amount being claimed and identifies the surrendering company, which must consent to the surrender. Both companies need overlapping accounting periods, and the relief is matched to that common period. Claims must usually be made within the normal time limit for amending the return, so timing matters, especially where accounting dates differ across the group. Keeping clear records of consents, computations and the allocation of any deductions allowance is essential if HMRC later reviews the position. Our wider accountancy and tax guide covers the surrounding filing duties in more detail.

Is group relief worth using?

For most groups the answer is yes. Group relief is one of the simplest and most valuable ways to reduce a group’s Corporation Tax, because it turns a loss in one company into a direct saving in another during the same period. The judgement lies in which company should claim and how to use the shared deductions allowance. Getting the allocation wrong can waste relief.

Group relief claims and loss allocations are a common focus of HMRC enquiries, and even a correct claim can prompt questions that take time and professional fees to answer. Solar Protect tax investigation insurance covers up to £100,000 of your accountant’s fees in defending an HMRC enquiry, with no excess to pay, so you can respond in full without worrying about the cost. To protect your group, get a quote today or contact us to talk it through.

Related Accountapedia entries

• Accounting for group relief payments
• Corporation tax enquiry window for group companies
• Are redundancy payments tax deductible

Reviewed by Matthew Bartlett, Director, Solar Protect. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.