Key facts
- Group relief requires a 75% parent–subsidiary relationship (direct or indirect).
- Items that can be surrendered include trading losses, excess management expenses, and qualifying charitable donations.
- Only current-year losses can be surrendered — brought-forward losses cannot be group-relieved.
- Both the surrendering and claiming companies must be in the same accounting period (or overlapping periods).
- A formal claim and consent process is required, with a 2-year time limit.
How Group Relief Lets Companies Share Tax Losses
Group relief is a mechanism that allows one company in a group to surrender certain tax losses and other deductions to another company in the same group, which then claims the relief against its own profits. This reduces the claiming company’s Corporation Tax liability.[1]
Without group relief, a loss-making subsidiary would carry its losses forward, while a profitable sister company would pay full Corporation Tax — even though the group as a whole may have little or no net profit.
The 75% Relationship
For group relief to apply, the companies must be in a 75% group relationship. This means:[1]
- One company must be a 75% subsidiary of the other, or
- Both must be 75% subsidiaries of a common parent
The 75% test looks at:
- Ordinary share capital — the parent must hold at least 75% directly or indirectly
- Economic ownership — the parent must be beneficially entitled to at least 75% of profits available for distribution and at least 75% of assets on a winding up
Indirect holdings: If Company A holds 80% of Company B, and Company B holds 80% of Company C, the indirect holding is 80% × 80% = 64%. This is below 75%, so A and C are not in a group relief relationship (although B is in a group with both A and C separately).[2]
What Can Be Surrendered?
The following items can be surrendered as group relief:[1]
| Item | Description |
|---|---|
| Trading losses | Current-year losses from the company’s trade |
| Excess management expenses | Investment company management expenses that exceed investment income |
| Qualifying charitable donations | Gift Aid payments that exceed the company’s profits |
| Non-trading loan relationship deficits | Excess non-trading interest costs |
| Excess UK property losses | Property business losses that cannot be used by the surrendering company |
Important: Only current-year amounts can be surrendered. Losses brought forward from earlier periods cannot be group-relieved — they can only be carried forward within the individual company.[3]
The Claim and Consent Process
Group relief is not automatic. Both companies must take action:[1]
- The surrendering company gives consent (a notice of consent to surrender)
- The claiming company makes a claim on its CT600 (or by amendment)
- The claim must specify the amount being surrendered and the period to which it relates
- Both must be filed within 2 years of the end of the surrendering company’s accounting period
Tip: Group relief claims can be made or amended after the CT600 has been filed, provided you are within the 2-year time limit. This is useful when final figures are not known at the time of filing. Amended returns can be submitted online in the same way as the original.
Corresponding Accounting Periods
Where the surrendering and claiming companies have different accounting period dates, group relief is restricted to the overlapping period. The amount available is time-apportioned based on the number of days in the overlap.[2]
For example, if Company A has a year end of 31 March and Company B has a year end of 31 December, only the losses arising in the overlapping months can be surrendered.
Overseas Losses
Losses of overseas group companies generally cannot be surrendered under UK group relief. However, there is a limited exception for losses of EEA-resident subsidiaries where the losses are “no possibilities” losses — meaning there is no prospect of the losses being used in the overseas territory. In practice, this exception is narrow and rarely applies.[2]
Frequently Asked Questions
What is group relief for Corporation Tax?
Group relief allows one company in a 75% group to surrender current-year trading losses and certain other deductions to another profitable group company, reducing the group’s overall Corporation Tax bill.
What ownership level is needed for group relief?
The parent must hold at least 75% of the subsidiary’s ordinary share capital and be beneficially entitled to at least 75% of distributable profits and assets on a winding up.
Can brought-forward losses be surrendered as group relief?
No. Only current-year losses can be surrendered under group relief. Losses brought forward from earlier periods must be carried forward within the individual company that incurred them.
What is the time limit for claiming group relief?
A group relief claim must be made within 2 years of the end of the surrendering company’s accounting period. Both a claim (by the claimant) and a consent (by the surrendering company) are required.
Can overseas losses be used for UK group relief?
Generally no. Losses of overseas group companies cannot be surrendered under UK group relief, with a very narrow exception for EEA subsidiaries where there is no prospect of the losses being used in the overseas territory.
Further Reading
- Trading Losses — carry-forward and carry-back rules for individual companies
- Capital Gains Group Relief — no gain/no loss transfers within a group
- Associated Companies — how associated companies affect CT thresholds
- Corporation Tax Refunds — how group relief can generate a refund
- The CT600 Tax Return — where group relief claims are made
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