The wholly owned group related party exemption

Q: What still has to be disclosed when the exemption applies?

Parent and controlling party. Paragraph 33.5 requires the relationship between a parent and its subsidiaries to be disclosed whether or not there have been transactions: the name of the parent and, if different, the ultimate controlling party, plus the next most senior parent that publishes accounts if neither of them does. Group balances on the face of the accounts. The statutory balance sheet formats include separate lines for amounts owed by and to group undertakings, so intra group balances are visible even when the related party note is silent. Note that 33.1A is worded in terms of transactions, whereas the government exemption in 33.11 expressly covers outstanding balances and commitments as well. Commitments and guarantees for group companies. Company law requires the total of financial commitments, guarantees and contingencies undertaken on behalf of or for the benefit of a parent, fellow subsidiary or subsidiary to be stated separately (paragraph 1AC.29 for small entities; paragraph 63(7) of Schedule 1 for larger companies). See financial guarantees for group borrowings. Directors and key management. Dealings with directors, shareholders and their families are outside the exemption, as is the key management personnel total in paragraph 33.7 unless paragraph 33.7A or the reduced disclosure framework in paragraph 1.12(e) removes it.

Transactions between members of a group need not be disclosed as related party transactions if every subsidiary that is a party to the transaction is wholly owned by a member of that group (FRS 102 paragraph 33.1A). The exemption comes from company law, applies to small companies too, and does not remove the duty to name the parent and ultimate controlling party.

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What exactly does the exemption say?

Paragraph 33.1A of FRS 102 states that the disclosures required by paragraph 33.9 need not be given of transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member. The FRC’s appendix on legal requirements (paragraph A3.40D) explains that this repeats the legal exemption in paragraph 72(4) of Schedule 1 to the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008. The Small Companies Regulations contain the same wording at paragraph 66(4) of Schedule 1.

For small companies, the revised FRS 102 that applies to periods beginning on or after 1 January 2026 requires the paragraph 33.9 disclosures in full, but paragraph 1AC.35 makes that subject to paragraphs 33.1A and 33.11. So a small company can use the group exemption on the same terms as a larger one. Subsidiaries reporting under FRS 101 have a matching exemption from IAS 24 in paragraph 8(k) of that standard.

ICAEW confirms there is no requirement to state in the accounts that the exemption has been taken. For the wider disclosure rules, see FRS 102 Section 33: related party disclosures.

What counts as a group and a wholly owned subsidiary?

The FRS 102 glossary defines a group as a parent and all its subsidiaries, a parent as an entity that has one or more subsidiaries, and a subsidiary as an entity, including an unincorporated entity such as a partnership, that is controlled by another entity. Section 1159(2) of the Companies Act 2006 defines a wholly owned subsidiary as a company that has no members except its holding company, that company’s wholly owned subsidiaries, or persons acting on their behalf. Shares held by a nominee for the parent therefore do not break wholly owned status; a single share held by a director in their own right does.

The definitions have one consequence that catches many owner managed businesses. An individual is not an entity or an undertaking, so two companies owned by the same person are not a group, however closely they trade. Section 1161 of the Companies Act defines an undertaking as a body corporate, a partnership or an unincorporated association carrying on a trade or business. Paragraph 33.8 gives transactions between two entities under the common control of a single entity or person as a typical example of related party transactions. Sister companies owned directly by a director must disclose their dealings with each other in full.

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Which transactions are covered?

The test is applied transaction by transaction, looking at each subsidiary that is a party to it.

Transaction	Exempt?	Why
Parent sells to its 100% subsidiary	Yes	The only subsidiary party is wholly owned
Two 100% subsidiaries of the same parent trade with each other	Yes	Both subsidiary parties are wholly owned by a group member
Parent lends to its 80% subsidiary	No	The subsidiary party is not wholly owned
A 100% subsidiary buys from an 80% fellow subsidiary	No	One of the subsidiary parties is not wholly owned
Subsidiary pays rent to the parent’s director	No	The director is not a group member
Two companies owned by the same individual	No	No parent entity, so no group
Subsidiary sells to an associate of its parent	No	An associate is not a member of the group

The exemption works for both parties. In the 80% case, the subsidiary must disclose its transactions with the parent and fellow subsidiaries, and the parent and those fellow subsidiaries must disclose their transactions with the 80% subsidiary in their own individual accounts.

How does it work in a sub group with a partly owned intermediate parent?

The FRC addresses this directly in Appendix III to FRS 102. Paragraph A3.40E says the exemption may be applied to transactions within a sub group where the transacting subsidiary is wholly owned by the intermediate parent of that sub group, even if the intermediate parent is not itself wholly owned by the ultimate parent. Paragraph A3.40F gives the FRC’s view that the exemption may not be applied to transactions between entities in the intermediate parent’s sub group, including the intermediate parent itself, and entities in the larger group if the intermediate parent is not wholly owned by the parent of the larger group. Otherwise a partly owned intermediate parent could create a wholly owned subsidiary and pass transactions through it to hide them.

Illustration only. Top Ltd owns 70% of Mid Ltd, which owns 100% of Low Ltd. Top Ltd also owns 100% of Side Ltd.

Mid Ltd and Low Ltd trade with each other: exempt, because Low Ltd is wholly owned by Mid Ltd.
Low Ltd sells to Side Ltd: not exempt under A3.40F, because Low Ltd sits in the sub group of a partly owned intermediate parent.
Top Ltd lends to Mid Ltd: not exempt, because Mid Ltd is only 70% owned.
Top Ltd provides services to Side Ltd: exempt.

What still has to be disclosed when the exemption applies?

Parent and controlling party. Paragraph 33.5 requires the relationship between a parent and its subsidiaries to be disclosed whether or not there have been transactions: the name of the parent and, if different, the ultimate controlling party, plus the next most senior parent that publishes accounts if neither of them does.
Group balances on the face of the accounts. The statutory balance sheet formats include separate lines for amounts owed by and to group undertakings, so intra group balances are visible even when the related party note is silent. Note that 33.1A is worded in terms of transactions, whereas the government exemption in 33.11 expressly covers outstanding balances and commitments as well.
Commitments and guarantees for group companies. Company law requires the total of financial commitments, guarantees and contingencies undertaken on behalf of or for the benefit of a parent, fellow subsidiary or subsidiary to be stated separately (paragraph 1AC.29 for small entities; paragraph 63(7) of Schedule 1 for larger companies). See financial guarantees for group borrowings.
Directors and key management. Dealings with directors, shareholders and their families are outside the exemption, as is the key management personnel total in paragraph 33.7 unless paragraph 33.7A or the reduced disclosure framework in paragraph 1.12(e) removes it.

What if ownership changes during the year?

FRS 102 does not say at what point wholly owned status is tested. Because the exemption refers to the parties to the transaction, a cautious approach is to look at ownership when each transaction took place. If a subsidiary was 100% owned until minority shareholders were brought in partway through the year, transactions after that date are disclosed. ICAEW’s guidance on relationships that change during the year takes a similar line: transactions arising while parties were related are disclosed, and balances are disclosed for parties related at the year end. Issuing shares to employees of a subsidiary can be the trigger, because even a small minority holding ends wholly owned status. See group share schemes in subsidiary accounts.

Is the exemption needed in consolidated accounts?

FRS 102 paragraph 9.15 requires intragroup balances and transactions, including income, expenses and dividends, to be eliminated in full on consolidation, so they do not appear in the group figures (see eliminating intra group transactions). The exemption earns its keep in the individual accounts of the parent and each subsidiary, where intra group management charges, loans, dividends and trading would otherwise all need a note. Transactions with partly owned subsidiaries and with associates or joint ventures still need disclosure.

What mistakes come up most often?

Treating companies owned by the same individual as a group and omitting their transactions.
Claiming the exemption for a 90% or 99% subsidiary.
Forgetting that a single share issued to a director or employee ends wholly owned status.
Using the exemption for transactions between a partly owned sub group and the rest of the group, contrary to A3.40F.
Dropping the parent and ultimate controlling party note because no transactions are disclosed.
Omitting guarantees given for group borrowings from the commitments note.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.