Group Relief for Corporation Tax: Surrenders, Claims, and Deadlines

Group relief for corporation tax lets one UK company hand over its tax losses to another company in the same 75% group, so the receiving company can deduct those losses from its own taxable profits and cut its corporation tax bill. The rules sit in Part 5 of the Corporation Tax Act 2010, and a valid claim comes down to three things: the two companies genuinely form a group, the loss is a type that can be surrendered, and the paperwork is filed correctly and on time.¹

When Two Companies Form a Group

Two companies are in the same group if one is a 75% subsidiary of the other, or both are 75% subsidiaries of a common parent. Section 151 of the Corporation Tax Act 2010 sets out three separate tests, and all three must be satisfied at once:²

The parent holds at least 75% of the subsidiary’s ordinary share capital.
The parent is beneficially entitled to at least 75% of the subsidiary’s profits available for distribution.
The parent is beneficially entitled to at least 75% of the assets that would be distributed on a winding up.

The economic tests exist because share capital on its own can mislead. A parent might hold three-quarters of the shares but only a class that carries no dividend or liquidation rights. All three limbs need to hold throughout the accounting period for the full loss to transfer; where the relationship exists for only part of the period, losses are time-apportioned to the overlap.

A non-UK-resident company can be part of a group relief group, but only if it carries on a trade in the UK through a permanent establishment that is within the charge to UK corporation tax.¹ Where a foreign parent sits between two UK companies in the ownership chain and has no such establishment, the chain is broken.

Losses That Can Be Surrendered

Section 99 of the Corporation Tax Act 2010 lists the amounts a surrendering company can hand over for the current accounting period:³

Trading losses.
Non-trading deficits on loan relationships (where interest and other financing costs exceed financing income).
Capital allowances that exceed taxable profits.
Management expenses of an investment business that exceed total profits.
UK property business losses.
Non-trading losses on intangible fixed assets, such as patents or goodwill.
Qualifying charitable donations that exceed available profits.

The surrendering company can only give away losses it has not already used against its own profits. The claimant can only absorb losses up to the amount of its own taxable profits for the relevant period. Group relief cannot be used to create or increase a loss in the claimant company.

Carried-Forward Losses: A Separate Regime

From 1 April 2017, Part 5A of the Corporation Tax Act 2010 allows losses carried forward from earlier periods to be surrendered to other group members.⁴ Before that date, carried-forward losses were stuck inside the company that generated them, which mattered for groups holding historical losses in dormant or low-activity subsidiaries.

Carried-forward relief comes with a cap that current-year relief does not have. Each group has a single deductions allowance of £5 million per year, shared across the whole group rather than granted per company.⁵ Above the allowance, only 50% of remaining profits can be offset using carried-forward losses.⁶ Most companies never hit the ceiling, but large groups with substantial profits need to plan around it.

The eligible categories under Part 5A are narrower than the current-year list: post-April 2017 trading losses, non-trading loan relationship deficits, management expenses, UK property business losses, and non-trading losses on intangible fixed assets.⁴ Current-year and carried-forward claims are filed separately, and the calculations run in parallel rather than combined.

Consortium-Owned Companies

If no single company owns 75% of a company but a group of companies collectively hold at least 75%, standard group relief does not apply. Consortium relief may be available instead. Each consortium member must individually hold at least 5% of the ordinary share capital.¹ Relief flows in both directions between members and the consortium-owned company, but the amount is scaled to each member’s ownership percentage: a 30% member can surrender or claim 30% of the losses on the table. Both companies must be UK-resident or trading through a UK permanent establishment.

Working Out How Much Can Be Surrendered

The calculation runs over the “overlapping period,” which is the window during which both companies were group members and their accounting periods were both live.⁷ Where accounting periods match exactly, the calculation is simple. Where they do not, both the losses and the profits are apportioned on a time basis to fit the overlap.

Take a surrendering company with a January to December accounting period and a claimant with an April to March period. Only nine months (April to December) overlap. The surrendering company’s losses are scaled to nine-twelfths, and the claimant’s available profits are cut to the same fraction. The amount that can actually be surrendered is the lower of two figures: the surrendering company’s unused losses for the overlap, and the claimant’s unrelieved profits for the same overlap. Both caps apply, so whichever number is smaller sets the ceiling.

How to File the Claim

The claim goes on the claimant company’s corporation tax return. Form CT600 is the main return; supplementary page CT600C carries the group relief details. For each surrender you record the surrendering company’s name, its ten-digit Unique Taxpayer Reference, its accounting period if it differs from the claimant’s, and the amount claimed.⁸ The total then feeds into box 310 of the main CT600.

The surrendering company has to give formal notice of consent to each claim, identifying both companies, stating the surrendering company’s accounting period, and specifying the amount being given up. A copy must reach HMRC’s office dealing with the claimant’s return before or at the same time as the return is filed.⁹ The CT600C itself can act as the notice of consent if the surrendering company’s section is completed and signed by an authorised person.

Groups that make frequent claims can apply for a simplified arrangement, which removes the need to attach a separate notice of consent to every claim. One authorised company then handles all surrenders and claims for the group.¹⁰ The application is made in writing to HMRC and must list every company covered along with a specimen of the standard form the authorised company will use.

Deadlines and Withdrawing a Claim

The deadline for making a group relief claim is the first anniversary of the filing date for the claimant’s return. Since returns are due twelve months after the end of the accounting period, this gives roughly two years from that period end. If HMRC opens an enquiry into the return, the deadline extends to 30 days after the enquiry closes, with further 30-day extensions where HMRC amends the return or an appeal is brought against such an amendment.¹¹ Miss the deadline and the relief is generally lost; HMRC rarely accepts late claims.

A group relief claim cannot be amended in place. To change the amount or fix an error, the original claim must be withdrawn and a fresh claim submitted, with the withdrawal made by amending the claimant’s return.¹¹ One detail that trips people up: if the surrendering company has already adjusted its own return to free up the losses (for example, by reversing a section 45 carry-forward), and it then wants to withdraw consent, it has to re-amend its own return at the same time. If it does not, the notice of consent stops being effective and the whole claim falls apart.

Watch Out for Loss Buying After an Ownership Change

Anti-avoidance rules block group relief that relies on acquiring a company mainly for its accumulated losses. Under section 676CF of the Corporation Tax Act 2010, if a company changes ownership and then undergoes a major change in its trade or business, group relief for carried-forward losses is blocked on the profits connected with that change.¹² The restriction runs for five years after the accounting period in which ownership changed, and “major change” is judged over a window from three years before to five years after the change. Any acquisition sitting behind a carried-forward group relief claim needs to be checked against this provision before the claim is filed.

1
legislation.gov.uk. Corporation Tax Act 2010 – Part 5 Group Relief
2
legislation.gov.uk. Corporation Tax Act 2010 – Section 151
3
legislation.gov.uk. Corporation Tax Act 2010 – Section 99
4
legislation.gov.uk. Corporation Tax Act 2010 – Part 5A Group Relief for Carried-Forward Losses
5
HM Revenue & Customs. Company Taxation Manual – CTM05010
6
GOV.UK. Corporation Tax Reform of Loss Relief
7
HM Revenue & Customs. Company Taxation Manual – CTM80210
8
GOV.UK. Supplementary Pages CT600C Group and Consortium Relief
9
HM Revenue & Customs. Company Tax Return Supplementary Page CT600C
10
legislation.gov.uk. Corporation Tax (Simplified Arrangements for Group Relief) Regulations 1999
11
legislation.gov.uk. Finance Act 1998 – Schedule 18 Part VIII Claims for Group Relief
12
HM Revenue & Customs. Company Taxation Manual – CTM06840