Executive Summary
Group relief is a UK corporation tax facility allowing one group company (the surrendering company) to transfer losses and similar reliefs to another in the same 75% group (claimant company), so the group as a whole pays tax on its net profit. In effect, the economic unit of the group pays tax on total group profits.
Only qualifying losses/amounts can be surrendered (trading losses, capital allowances excess, loan deficits, UK property losses, charitable donations, excess management expenses and some intangible losses), and strict ownership and timing tests apply. The surrender requires a written notice of consent from the losing company, and the claim must be made on the CT600 return by the profitable company (using the CT600C supplementary pages).
In practice the claimant (profit-making) co normally pays the surrenderer an amount equal to the tax saved (e.g. 25% of losses at the 25% CT rate), which reflects the neutral economic effect. Recent changes (e.g. rules allowing carried‑forward losses to be surrendered since 2017, and Brexit-related abolishment of EEA cross-border rules) and key cases (below) have refined the rules. This report sets out the definitions, qualifying conditions, eligible relief types, administrative mechanics, examples, interactions with other rules, and compliance tips for UK group relief, with comprehensive references to HMRC guidance and statutes.
Definition and Purpose of Group Relief
Group relief (CTA 2010 Part 5) is a deduction against corporation tax whereby a loss in one UK group company is surrendered to another UK group company’s tax return. The basic idea is to treat the group as one economic unit: e.g. if Company A makes a £200 profit and Company B (in the same 75% group) makes a £100 loss, the group’s net profit is £100 and tax is paid on that.
While relief is transferred between companies, each company remains a separate tax entity – the surrendering company must consent to the claim. In return, the claimant company can set off the surrendered loss against its own profits in that period, reducing its CT liability. In practice, the claimant will often reimburse the surrenderer the tax saving (e.g. 25% of the losses at a 25% CT rate), which is ignored for tax purposes. Thus, group relief is a cash-flow planning tool: the group saves the same tax, but the payment goes to the sister company instead of HMRC.
Qualifying Conditions for Group Relief
Group Membership (75% Test): The surrendering and claimant companies must be in the same CT group under CTA 2010/S152. That means one is a 75% subsidiary of the other, or both are 75% subsidiaries of the same parent. “75% subsidiary” means direct or indirect beneficial ownership of at least 75% of ordinary share capital. Indirect holdings are aggregated (multiplying through ownership chains). The ownership test also requires beneficial entitlement to profits and assets. Important: Anti-avoidance rules apply (CTA 2010/S154–156) – if there are arrangements such that one company could exit the group or change control without a tax adjustment, the companies may no longer be treated as a group.
Permanent Establishments: Since 2000, UK law treats a foreign parent’s UK permanent establishment (PE) as within the charge to CT for group purposes. A non-UK company trading through a UK PE can surrender losses to its UK parent (or vice versa) as if the PE were a UK company. (Special computations may apply – see HMRC CTM80310 for details.) Similarly, a UK company’s foreign PE cannot surrender losses against UK profits beyond treaty provisions.
Timing/“Overlap” of Accounting Periods: The claimant and surrendering company’s accounting periods must “overlap” by at least one day. In practice, group relief is claimed in the claimant’s CT return for the period that corresponds to the surrendering company’s period of loss. Claims must be made by including them in the CT return for that period (or by amending that return).
Time Limits: By default, a group relief claim (or withdrawal of a claim) must be made within one year after the filing date of the claimant’s return. This is effectively up to two years after the end of the period. If HMRC opens an enquiry, the deadline is extended to 30 days after the enquiry finishes (and 30 days after any appeal of an amendment). HMRC can also extend deadlines in practice.
Consent Requirement: Every claim must have the consent of the surrendering company. The surrendering company must give written notice of consent to the HMRC office it deals with, on or before the time of the claim. The notice must identify the surrendering company, the period and loss/amount surrendered. The consent must also be accompanied by a copy of the surrendering company’s accounts for that period (audited or with equivalent assurance). If the surrendering company has already filed its return, it must amend its return concurrently when giving consent, so that its return reflects the loss surrender.
Withdrawal of Consent: If a surrendering company needs to change or withdraw a consent (for example, because the allowable loss changed), it must withdraw the previous notice and issue a new one, with the claimant’s written agreement to the withdrawal. The claimant must then amend its return accordingly.
Eligible Loss and Relief Types
CTA 2010/S99–104 enumerate the relevant amounts that can be surrendered. In summary:
Fully Surrenderable Amounts:
Trading losses (CTA/S100): genuine trading losses in the surrender period. The surrendering company may surrender all of its trading loss (no need to use it against its own profits first), subject to normal loss restrictions (e.g. non-commercial losses are excluded). Terminal losses (losses on final 12 months of trade) are treated as trading losses and likewise surrenderable.
Capital allowances excess (CTA/S101): any “excess” of capital allowances over taxable profits for that period (for plant & machinery, long-life assets, etc).
Non-trading deficits on loan relationships (CTA09/CTA10 Ch 16): deficits from loan relationships (e.g. interest expenses) that exceed taxable income in that period.
All of the above (trading, capital allowances, loan deficits) can be surrendered in full, even if the surrendering company has other profits.
Partially Surrenderable (“Relevant”) Amounts (Profit-Related Threshold):
Qualifying charitable donations: Only the amount by which total qualifying donations exceed the “profit-related threshold” can be surrendered. (Before 20 Mar 2013 this was “gross profit” threshold.)
UK property business losses: Passive property losses (excluding pre-April 2017 carry-overs) can be surrendered only above the threshold. (From Apr 2017, carried-forward property losses may be surrendered as carried-forward losses – see below.)
Excess management expenses: Investment management business expenses can be surrendered only to the extent they exceed the threshold.
Non-trading losses on intangible fixed assets: Passive losses on intangibles can be surrendered above the threshold.
In effect, the surrendering company must have aggregate “relevant amounts” (these items) greater than its profit-related threshold (usually 25% of profits) before any of these can be passed to a sister company. (HMRC notes the prescribed order of surrender: charitable donations first, then property losses, then management expenses, then intangibles.)
Other Reliefs: Group relief does not apply to capital gains losses (those are only offset against capital gains under CGT rules). Also, UK group relief cannot itself create a trading loss for the claimant – only actual losses carried in accounts are surrendered.
Carried-Forward Losses (Post-2017): From 1 April 2017, companies may surrender certain losses brought forward under CTA2010/S381(1) (trading, property, interest, entertainment) as group relief (CTA2010 Part 5A) subject to new restrictions. Importantly, companies with profits over £5m per group can only offset 50% of their profits with all carried-forward losses. (Small groups under £5m have full relief.) These rules are complex (see COM97020ff), but effectively limit how much carried-forward loss a group member can absorb.
Table: Eligible Losses and Restrictions
Loss/Amount Type | Surrenderable by Group Relief? | Notes/Conditions |
|---|---|---|
Trading losses (current period) | Yes, fully | Must be bona fide trading loss; non-commercial losses excluded. Surrenderer may forgo all trading loss to claimant. |
Excess Capital Allowances | Yes, fully | Any excess of allowances over taxable profits can be given as relief. |
Non-trading loan relationship deficits | Yes, fully | Surrenderer need not use it on own profits first. |
Charitable donations (qualifying) | Only above profit threshold | Only the amount by which total donations > 25% of profits (or gross profit pre-2013) is surrenderable. |
UK property business losses | Only above threshold (similar rule) | (Post-2017: carried-forward property losses can be surrendered as carried losses under Part 5A.) |
Excess management expenses | Only above threshold | Applies to investment business; see CTM for details. |
Intangible fixed asset losses | Only above threshold | (Cannot include losses carried from before 1 Apr 2017 unless new rules allow.) |
Summary: Trading, CA excess, loan deficits surrenderable in full; the rest (d–g above) only to extent exceeding profit-related threshold. |
Mechanics of Surrender and Claim
The procedure for surrender and claim is governed by CTA 2010 Pt 5 and FA 1998 Sch 18, and summarised by HMRC and practice guides:
Group and Amount Assessment: Identify the group members and confirm both companies qualify as within the UK CT charge (including UK PEs of foreign companies). Compute the available losses/amounts that can be surrendered under CTA 2010/S99–104. The surrendering company decides how much to surrender (up to its total eligible loss).
Board Approval (Practice): Although not legally mandated, it is prudent for each company’s board to approve the surrender: the claimant board approves the claim amount, and the surrenderer board approves giving notice of consent.
Notice of Consent (Surrendering Company): The surrendering company gives a written notice of consent to HMRC (to the office where it files its CT return). The notice must state the amount and type of relief surrendered and the relevant accounting period. HMRC advises including audited (or properly assured) accounts to substantiate the loss. The notice must be given on or before the claim is made. If the company has already filed its return, it must amend that return simultaneously to reflect the loss surrendered.
Claim on CT600 (Claimant Company): The claimant company must include the group relief claim in its CT600 return for the period. Specifically:
Use CT600 supplementary page C (Group & Consortium): Part 1 lists Claims to group relief from each surrendering company – entering each surrenderer’s name, AP, tax ref, and amount. The totals are carried to the CT600 main form (box 310 on v3, box 36 on v2). The claimant attaches a copy of the surrenderer’s notice of consent with its return.
If the company is surrendering amounts, it fills Part 2 (Amounts surrendered) – listing the claimant company’s name (if another sub is claimant), AP, tax ref, amount, and nature of amount. The surrenderer must also complete the “losses, deficits and excess” section of its CT600 to show the effect on its tax calculation.
Form CT600 (Main Return): The claim appears as part of the tax computations on the CT600 (the surrendered sum reduces the claimant’s taxable profits). Technically, a claim is “made” when the CT600 (and CT600C) is filed or amended for the relevant period.
Documentation and Record-Keeping: Keep a copy of every notice of consent and proof of delivery. Retain records of board resolutions and computations. The surrendering company’s accounts should clearly show the surrendered loss. HMRC expects a high standard of evidence (often audited accounts) for group relief claims.
Timing and Amendments: The claim can be in the original return or an amendment (within time limits). If claims are made close to deadlines, ensure consents were given prior. After filing, if a mistake is discovered, corrections can only be made by withdrawing and re-making claims as allowed by Schedule 18.
Payment and Internal Agreement: Separately (outside tax law) the group often agrees payment between companies for the relief. By convention, the claimant pays the surrendering company (e.g. 25% of the loss) – note this payment is not a deductible expense for the claimant nor taxable income for the surrenderer.
Table: Surrender/Claim Process Overview
Step | Actor | Action/Requirement |
|---|---|---|
1. Identify group & losses | Accountants/Management | Confirm 75% group relationship. Compute eligible losses to surrender. |
2. Surrender approval | Surrender Co directors | Approve surrender amount (board minutes). |
3. Notice of consent | Surrender Co | Send written notice to HMRC (with details of losses and period). If return filed, amend concurrently. |
4. Claim on CT600 | Claimant Co | Complete CT600 and CT600C: list each surrenderer’s name, AP, ref, amount; attach consents. |
5. File/amend return | Claimant Co & Surrenderer | File CT600 by deadline. If outside normal time, file amended returns within 1 year or extended period. |
6. Record-keeping | Accountants | Keep copies of consent notices, signed CT600C, board resolutions, accounts etc. |
Computation Examples
Example 1 – Full offset: Company S has a trading loss of £100k. Company C in the same group has trading profit £100k. UK CT rate is 25%.
Without group relief: S has no tax (loss), C pays tax on £100k = £25k.
With group relief: S surrenders £100k loss to C. S ends with a £0 tax loss, C’s taxable profit becomes £0, so tax = £0. Tax saving is £25k (which the group can capture as a payment of £25k from C to S).
Company | Profit | Loss | Taxable Income (without GR) | CT (without GR) | Taxable Income (with GR) | CT (with GR) |
|---|---|---|---|---|---|---|
Surrenderer (S) | £0 | £100k | £0 | £0 | £0 | £0 |
Claimant (C) | £100k | £0 | £100k | £25,000 | £0 (100–100) | £0 |
Total | £25,000 | £0 |
Example 2 – Partial offset: S has loss £50k; C profit £100k; CT rate 25%.
Without GR: C tax = £25k.
With GR: C claims £50k, reducing its taxable profit to £50k. New C tax = £12.5k. Group tax = £12.5k. Tax saving £12.5k (typically paid by C to S).
Company | Profit | Loss | Taxable (no GR) | CT (no GR) | Taxable (with GR) | CT (with GR) |
|---|---|---|---|---|---|---|
S | £0 | £50k | £0 | £0 | £0 | £0 |
C | £100k | £0 | £100k | £25,000 | £50k | £12,500 |
Total | £25,000 | £12,500 |
These illustrate the tax impact: the claimant’s tax bill falls by the surrendered loss × 25% (e.g. £12.5k in Ex1, £25k in Ex2), which the surrenderer receives as consideration.
Interaction with Other Reliefs and Rules
Consortium Relief: If a UK company is not owned 75% by a single parent but by a consortium of parent companies, consortium relief (CTA/S132–133) provides a similar offset by splitting surrendered losses among the consortium. If a consortium structure applies, see HMRC CTM80530+.
Loss Restriction Rules: Corporate restructuring rules (CTA Part 14) can restrict use of losses (including group relief) after changes of ownership or mergers. For example, “pre-acquisition” losses might be lost or deferred if a company is taken over in certain anti-avoidance provisions. Accountants should check CTA/S1127+ on loss restriction before surrendering pre-acquisition losses.
Corporate Interest Restriction (CIR): Since 2017, net interest deductions are capped at 30% of EBITDA (CIT Act 2013). This does not directly alter group relief, but it may limit a company’s own profits (reducing the base for losses) and thus indirectly affect how much profit can be offset by surrendered losses.
Transfer Pricing: Intra-group transactions must be at arm’s length. If group relief involves intra-group arrangements (e.g. the intra-group payment for relief), these are ignored for CT (the payment is non-deductible and non-taxable). However, companies should ensure that all related-party deals (sales, loans) are properly priced, since artificially shifting profits out of a group member could reduce its losses and hence the group relief available.
Degrouping and Exit Charges: Group relief itself does not trigger de-grouping charges. However, corporate reorganisations (mergers, de-mergers) may involve de-grouping charges on asset transfers under CTA2010/S137+ if conditions are breached. Accountants should be cautious: surrendering losses between certain companies and then moving assets might have unintended chargeable gains. Where a company leaves the group, past capital allowances/loans and reliefs should be reviewed for balancing or degrouping adjustments.
Other Tax Accounts: Group relief deals only with CT losses. It has no effect on VAT or other taxes. Also, carrying out group relief does not grant relief against trading losses under Income Tax or allow group relief for Income Tax liabilities.
Key Case Law and Tribunal Decisions
Farnborough Airport Properties Co Ltd v HMRC (2019, CA): When the surrendering company went into receivership, the Court held that the original shareholders lost control and so the two companies were no longer in the same group. Thus group relief was denied. This illustrates that insolvency or changes in control can break the group.
FCE Bank Plc v HMRC (FTT 2010): Two UK subsidiaries sought group relief but their common parent was US-resident. HMRC refused under the old ICTA rule requiring a UK-resident parent. The Tribunal held that the UK/US Double Tax Treaty’s non-discrimination article did not override the statutory requirement. Group relief was denied solely because of foreign parentage. (This decision was under pre-2000 law; CTA 2010 now explicitly allows UK PEs of non-residents.)
Lloyds Asset Leasing Ltd v HMRC (FTT 2025): HMRC denied cross-border relief (for losses of an Irish subsidiary) on the basis of the “main purpose” anti-avoidance test in CTA 2010/S127. The Tribunal agreed that obtaining the tax benefit was a main purpose of the arrangement. This highlights that structured transactions primarily aimed at generating group relief can fail under anti-avoidance.
Other Points: Tribunal decisions have also held that group companies must be “within CT charge” (so a purely exempt or foreign entity not carrying on UK trade generally cannot claim). Readers should watch for new Tribunal cases, especially post-2017 changes and any judgments on carried-forward loss restrictions.
Appendices: Tables and Charts
Table – Timeline for Group Relief Claims
Action/Event | Timing | Notes/Reference |
|---|---|---|
Compute and agree losses | At or soon after period end | Based on finalized accounts. |
Issue board resolutions (optional) | Before surrender | For corporate record. |
Give notice of consent (surrenderer) | Before or at claim time | Must be in writing to HMRC (CTM). |
File CT600C (claimant) | With CT600 for relevant period (or amendment) | Claim made by including in return. Attach consent. |
Deadline for claim/withdrawal | ≤1 year after filing date | Or 30 days post-enquiry if extended. |
Amend surrenderer’s return (if filed) | When consent given | HMRC requires simultaneous amendment. |
(If needed) Withdraw/replace consent | Before finalizing returns | Must notify HMRC, with claimant’s agreement. |