Definition & Purpose of Consortium Relief
Consortium relief is an extension of group relief. Under CTA 2010/S153, a company owned by a consortium is one that (i) is not a 75%-subsidiary of any single company, and (ii) has ≥75% of its ordinary share capital beneficially owned by other companies each holding ≥5%. Those companies (each ≥5%) are the members of the consortium. In practice, this means two or more companies together hold at least 75% of a company’s shares (and each at least 5%). The company may be a trading company, or a holding company whose business is holding 90%-subsidiary trading companies. Crucially, if any one company did own ≥75%, group relief applies instead and consortium relief cannot be used.
The purpose of consortium relief is to allow tax losses to be surrendered within a consortium similarly to group relief. It prevents orphans under common ownership from being excluded merely because no single parent holds 75%. For example, if three investors each hold 33% of a trading co, group relief fails but consortium relief permits them to pool losses. Relief can flow both upward (from consortium members to the consortium-owned company) and downward (from the owned company to members) if conditions are met. This flexibility helps mitigate tax inefficiencies in complex ownership structures, such as joint ventures or post-acquisition financing arrangements.
Legal Basis and Interaction with Group Relief
Consortium relief is governed by the group relief provisions of CTA 2010 Part 5 and related sections. The HMRC Company Taxation Manual (CTM) clearly outlines these:
Definition of Consortium & Company (CTA/S153): The statutory definition is in CTA2010/S153, excerpted by HMRC. A company is owned by a consortium if not 75%-owned by one company, but at least 75% of its shares are beneficially held by companies each owning ≥5%. The other companies are the members of the consortium. Beneficial ownership includes any holdings by connected persons (see CTA/S153(1)(b)), so indirect or attributable interests count.
Limits on Participation: If the consortium-owned company (or its 90% trading sub) becomes 75%-owned by any party, then group conditions (CTA/S131) supersede and only group relief is allowed. Moreover, a profit on sale of consortium shares that is taxed as trading income (e.g. because a member held shares as trading stock) disqualifies the consortium claim.
Claim Amount Rules (CTA/S143–S144): The amount of relief is capped by each party’s ownership proportion of the relevant profits or losses. If a consortium member claims relief from the consortium-owned company, Section 143 limits it to the lowest of its percentages of share capital, profits entitlement, assets entitlement, or voting power (within an overlapping period). Similarly, if the consortium-owned company claims from a member, Section 144 applies the same ownership proportion test. These rules mirror the group relief allocation rules (see CTA/S165–S167) but applied to a consortium context (treat parent as consortium member, subsidiary as consortium-owned company).
Wider Group Interaction (CTA/S149, S146B): When a consortium-owned company is also in a wider group, its available profits for consortium claims may be reduced by potential group relief claims (CTA/S149). There are also anti-avoidance rules: CTA/S146B targets arrangements that prevent a consortium member from controlling the company (even if ownership would grant control absent those arrangements) where preventing that control is a main purpose (a tax avoidance motive). Under S146B, the normal ownership proportion can be halved if an arrangement was made primarily to gain consortium relief.
Eligibility Criteria
To claim consortium relief, the following criteria must be satisfied:
Qualifying Companies: Generally, both claimant and surrendering companies must be trading companies or holding companies of trading groups. In other words, the losses claimed and the profits surrendered must relate to trades. Pure investment companies outside these definitions may not qualify.
Consortium Ownership: The core test (CTA/S153) requires at least 75% collective beneficial ownership of a company’s share capital by consortium members (each of whom must beneficially own ≥5%). Beneficial includes shares owned by associated or connected persons (so look through shareholder agreements, trusts, and groups under CTA/S1122). For example, if two family-owned companies hold shares, their ownership may be aggregated if they are connected in tax terms.
Shareholding Thresholds: The CTA and HMRC guidance specifically require: between them beneficially own at least 75% of the ordinary share capital… each beneficially owns at least 5%” If a member falls below 5%, it is not a member of the consortium (nor can claim relief). If the others still reach 75%, the consortium continues among the remaining members. Note also that non-corporate shareholders (e.g. individuals) may hold up to 25% without spoiling the consortium claim – but their 25% still dilutes the proportions used for relief (since proportions are of total capital).
Company Owned by Consortium: The company in question must not already be 75%-owned by any single entity (if it is, group relief takes precedence). It can be:
A trading company directly held by the consortium;
A directly held holding company whose sole business is holding 90% trading subsidiaries;
Or a 90% trading subsidiary of such a holding company.
In all cases, its trading profits (or losses) are the basis for consortium loss relief.
Consortium Composition: Any company owning ≥5% can be a “member of the consortium” regardless of whether it intends to participate in claims. In practice, only the active members (surrendering or claiming) matter. A member of a consortium may also be part of a broader group – in which case it is a link company and can enable Conditions 2/3 (claims via group members).
In summary, eligibility is technical: advisers should document the ownership structure and verify CTA/S153 conditions (75% and 5% tests) in each relevant period. All criteria must hold throughout the overlapping period with the surrendering company.
Calculation and Worked Examples
Once a valid consortium relationship is established, the loss relief calculation proceeds in two stages:
Determine Ownership Proportions
Under CTA/S143–S144, each claimant’s share of the relevant total (profits or losses) is given by the lowest of several percentage tests. In simple cases where shareholders’ rights (capital, profits, assets, voting) coincide, the share capital proportion usually dominates. For each member claiming relief from a consortium-owned company (Condition 1), use Section 143. For the consortium-owned company claiming from a member, use Section 144.
The result is each claimant’s ownership proportion of available relief.Apportionment to Parties
Losses (or profits) are then surrendered or claimed up to those proportions. For a surrendering company, it gives written notice (consent) to surrender up to its available loss multiplied by each claimant’s proportion. A claiming company reduces its taxable profits by the proportionate share of the surrendered loss.
Below are two numerical examples. These illustrate downward and upward claims within a consortium. Each example assumes overlapping accounting periods (for simplicity, use same period for all companies).
Example 1: Consortium members have losses, company owned by consortium has profit.
Company C is 75%-owned by A (60%) and B (15%) as members; 25% by others. C has £100 profit in the period.
A has £50 of losses to surrender; B has £30 of losses.
Under CTA/S143, A’s ownership proportion in C is 60%; B’s is 15% (we assume voting and assets proportions align). Thus A can claim up to 60% of £100 = £60 of losses, B up to 15% of £100 = £15. However, each can only claim up to their available losses (50 and 30 respectively). So A claims £50 (its full loss), B claims £15 (part of its £30 loss). The remaining 25% of C’s profit (25 points) is unused and cannot be claimed.
Example 2: Company owned by consortium has losses, members have profits.
Same shareholding (A 60%, B 15%). Now suppose C has a loss of £80, and A and B have profits (available to absorb losses) of £70 and £50 respectively.
Under CTA/S144, C’s loss relief is limited by each member’s ownership proportion. A’s share is 60% of £80 = £48; B’s share is 15% of £80 = £12. Thus C can receive up to £48 from A’s profits and £12 from B’s. Here A has enough profit (70) so surrenders £48 to C, and B surrenders £12 (up to its £12 share), for a total surrendered £60. The remaining £20 of C’s loss (25%) cannot be relieved under consortium relief.
These outcomes are summarised below:
Claim Scenario | A’s % | B’s % | A’s Max Claim | B’s Max Claim | Actually Claimed A | Actually Claimed B | Total Used | Wasted |
|---|---|---|---|---|---|---|---|---|
Example 1 (C has £100 profit) | 60% | 15% | 60 (of 100) | 15 (of 100) | 50 (cap by loss) | 15 | 65 | 35 (unused profit) |
Example 2 (C has £80 loss) | 60% | 15% | 48 (of 80) | 12 (of 80) | 48 | 12 | 60 | 20 (unrelieved loss) |
Each calculation followed CTA/S143–S144 ownership rules. For Example 1, A’s and B’s claims are limited both by their ownership proportions and by their available losses; in Example 2, C’s claims are similarly capped by members’ profit and share proportions. The leftover percentages (25% in each case) illustrate that aggregate ownership proportions need not equal 100%, and any shortfall (e.g. due to external shareholders) yields no relief.
Timing, Claims Procedure and Filing
Claims for consortium relief are made in much the same way as group relief claims, using the Corporation Tax return (CT600):
CT600 / CT600C: A claim must be made by completing the CT600 (company tax return) and the CT600C (supplementary group/consortium relief page). The claim is quantified in money (not formula). The CT600C requires details of each surrendering and claimant company (name, tax ref, accounting period, amounts).
Quantifying Claims: Each claim must specify the exact loss amount being transferred. A company may claim less than its full available loss but cannot exceed it or that which is available for surrender. Separate claims/consents are needed for each pair of surrendering and claiming companies per period.
Consent Notices: Except in “simplified arrangements”, every group/consortium relief claim requires a notice of consent from the surrendering company (the company giving up losses). The surrendering company must simultaneously adjust its CT return to reflect the consent (if already filed) and send copies of consent notices to the claimant’s caseworker. If later adjustments change available losses, consents must be amended or replaced.
Time Limits: The normal deadline for making (or amending) group/consortium relief claims is one year after the filing date of the return (which is no sooner than 2 years after the period end). If HMRC opens an enquiry, the time limit extends to the conclusion of that enquiry. Claims cannot be made after this extended deadline, but existing claims can be withdrawn or reduced up to then.
Election Options: There is no special “election” form for consortium relief; it is claimed via CT600 like group relief. No separate form is needed (unlike some other reliefs). All supporting calculations should be kept on file. The CT600C and accompanying computations must be retained in case of HMRC review.
Documentation: Practitioners should prepare:
A clear calculation of ownership proportions (including share registers and any voting agreements) for the overlapping period.
Draft consent notices signed by surrendering companies.
The CT600 with completed CT600C schedule.
A working paper showing how relief is apportioned (like the examples above).
Consortium claims are often scrutinised by HMRC, so maintaining detailed working papers is essential.
Common Pitfalls, HMRC Challenges and Adviser Tips
Misidentifying the Relationship: A common error is treating two companies as a “group” when no 75% link exists, or vice versa. Always apply CTA/S153 tests: e.g. if one owner actually holds 75%, group relief – not consortium relief – is available. Conversely, remember that consortium relief can apply even if a 90% sub is held, as long as no single 75% owner exists.
Ignoring Beneficial/Connected Ownership: Failing to consolidate connected persons’ holdings can invalidate a claim. Ensure you include shares held via subsidiaries or by persons connected by the CTA definitions when determining the 75% and 5% thresholds and in calculating proportions.
Overlooking Voting Arrangements: HMRC scrutinises articles of association or shareholder agreements. If a member’s actual control has been limited (e.g. requiring supermajorities), CTA/S146A/B may apply. To avoid disputes, advisers should document that any such arrangements are commercially justified and not primarily for tax advantage.
Calculation Errors: Under CTA/S143–S144, always take the lowest of the share, profit, asset or voting proportions. Do not assume proportions sum to 100%. As the HMRC manual notes, “the total of all the members’ ownership proportions will not necessarily add up to 1”. Any shortfall is lost relief. Always use the actual total share capital (including non-members) in the denominator.
Documentation Deficiencies: HMRC expects detailed workings. Keep for each period: (a) share register and beneficial breakdown, (b) profit and asset entitlements (e.g. share classes, dividend rights), (c) working model of S143/S144 calculation, and (d) copy of CT600 and consent notices. Lack of documentation is a red flag.
Timing and Amendments: The 1-year-from-filing deadline is strict. Missing it forfeits consortium claims. Also, any amendment withdrawing or altering a claim requires amending the original CT600 and re-submitting consents. Practitioners should calendar return deadlines and enquiry closure dates to manage amendments.
Interplay with Group Relief: If a link company or consortium-owned company has other group connections, check CTA/S148-149 restrictions. For example, if a consortium-owned company could claim group relief from other group members, it may have to exhaust that first. The manuals (e.g. CTM80585) contain guidance on limiting consortium claims by potential group claims.
Tips for Advisers:
Verify Definitions: Start by confirming the consortium meets the statutory definition (good time to use a checklist).
Run Both Directions: Calculate claims “upward” (members to company) and “downward” (company to members), since both may be possible (CTM80545).
Use Overlapping Periods Correctly: If members and consortium company have different accounting dates, compute the overlapping period as per CTA/S138–S142.
Anti-Avoidance Awareness: If restructuring, assess whether altering voting rights might accidentally trigger S146A or S146B. Pre-clearance or thorough documentation can help if changes are needed for commercial reasons.
Check Consents: Ensure consenting (surrender) companies adjust their returns in tandem with giving notice. Missing this step can invalidate claims.