Group relief

Produced by Tolley

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Group relief
  • Reforms to corporation tax loss relief
  • Definition of ‘group’ for group relief purposes
  • Sub-subsidiaries
  • Illustration
  • Available amounts
  • Payments for group relief
  • Overseas companies
  • Trapped losses
  • Maximum relief
  • More...

Group relief

Group relief allows losses to be surrendered from loss-making companies to profitable companies in the same 75% group. The maximum claim is the lower of either:

  1. the available loss

  2. the available profit

In addition, there are rules allowing the allocation of capital gains and losses to other group members. The definition of a ‘group’ is slightly different for group gains purposes. For information on this, see the Group gains guidance note.

The video entitled The principles of group relief also explains the 75% group definition, as well as providing further information on group relief of current year and carried forward losses. It covers some of the considerations to be made in allocating losses in a tax efficient manner and walks through Illustrative examples to show how the calculations are performed.

The Group relief ― further aspects video explores non-coterminous and short accounting periods, companies joining or leaving a group, plus issues relating to non-resident subsidiaries and overseas permanent establishments.

Reforms to corporation tax loss relief

Reforms to corporation tax loss relief were included in Finance (No 2) Act 2017. The changes introduced more flexibility for the utilisation of losses carried forward and also the ability to group relief carried-forward losses. In addition, a restriction was introduced such that only 50% of profits in excess of £5 million can be offset by losses brought forward.

For accounting periods beginning on or after 1 April 2017, or straddling 1 April 2017, the additional relaxation allowing group relief for carried-forward losses and the related 50% restriction to that relief are dealt with in detail in the following guidance notes and related worked examples:

  1. Group relief for carried-forward losses

  2. Carried-forward losses restriction

It should be noted that additional anti-avoidance provisions have been introduced specifically to protect against abuse of this and other relaxations that also impact most existing loss provisions. An overview of anti-avoidance provisions is contained in the above guidance notes.

The commentary set out below in this guidance note deals with relief for

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