How Group Relief Can Lower Your Corporation Tax Bill

If you run a group of companies, group relief could be a valuable tax-saving tool. It allows companies within the same group to share losses, reducing the overall Corporation Tax liability.

📉 How Does Group Relief Work?

When one company in the group makes a loss, it can transfer that loss to another company within the group. This reduces the total taxable profits across the group, ultimately lowering the tax bill.

Example:

✅ Parent company profits: £1,000

✅ Subsidiary losses: £100

✅ Total taxable profit after group relief: £900 (instead of £1,000)

This means tax is only paid on £900, leading to direct savings for the group.

Key Rules for Group Relief

To qualify for group relief, certain conditions must be met:

✅ Common Ownership: The companies must be part of the same group, with at least a 75% ownership link between them.

✅ Surrendering Company’s Consent: The company transferring the losses must agree to the transfer.

✅ Losses vs. Profits: The amount claimed must be the lower of:

• The surrendering company’s available losses

• The claimant company’s total taxable profits

Special Rules Apply If…

Certain scenarios can impact how group relief is applied:

• The company has a UK or overseas permanent establishment, which might qualify for tax relief elsewhere.

• There are arrangements affecting group relationships, such as mergers or share transfers.

• The loss originates from a 75% subsidiary in the EEA (European Economic Area).

Why This Matters

If you operate multiple companies, group relief could significantly cut your Corporation Tax bill by making better use of losses across your group.

Not sure if you qualify? Contact Us and we’ll help break it down for you!