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Taxation (UK) · The effect of a group corporate structure for corporation tax purposes

Groups and Overseas or Consortium Relationships in ACCA Taxation (UK)

Updated 11 October 2026 · Fact-checked

A 75% group exists when one company owns at least 75% of another's ordinary share capital, directly or indirectly. Group relief lets trading losses move between UK-resident companies in the group, or non-UK companies trading in the UK through a permanent establishment. Indirect holdings need the effective 75% test. Consortium relief applies where members each own at least 5%.

Understand Groups and Overseas or Consortium Relationships

Companies are taxed separately, so one company's loss cannot normally reduce another company's profit. Group relief is an exception. It lets companies in a 75% group surrender trading losses to each other, so the group pays less corporation tax overall.

Two companies are in a 75% group when one is a 75% subsidiary of the other. That means the parent owns at least 75% of the ordinary share capital. Two subsidiaries are also grouped if they share a common parent that holds at least 75% of each. The parent must also be beneficially entitled to at least 75% of profits available for distribution and of assets on a winding up.

Indirect holdings need care. Suppose A owns 80% of B, and B owns 80% of C. A's effective interest in C is 80% × 80% = 64%. That is below 75%, so A and C are not in a group relief group. The effective test is applied to ordinary share capital, to entitlement to profits available for distribution, and to entitlement to assets on a winding up. All three must reach 75%.

The pairs are tested one by one. B is a 75% subsidiary of A, and C is a 75% subsidiary of B. So A and B remain a grouped pair, and B and C remain a grouped pair. Only the A and C pairing fails.

The 51% test is not the group relief test. It is a different group test, used for example in chargeable gains groups. Do not use it for group relief. Learn which relief uses which percentage.

Overseas companies: a UK-resident company can be in the group. A non-UK resident company can be in the group only if it trades in the UK through a permanent establishment. Only the losses of that UK trade (those attributable to the permanent establishment) qualify for relief. An overseas company with no UK permanent establishment is not in a group relief group.

Consortium relief: a trading company that is not a 75% subsidiary of another company is owned by a consortium if at least 75% of its ordinary share capital is beneficially owned between companies (its members) that each hold at least 5%. A company is also owned by a consortium where it is a trading company that is a 75% subsidiary of a non-trading holding company which is itself owned by a consortium. Relief can pass in two ways:

  • A member claims the consortium company's loss. The claim is limited to the lower of the member's percentage share of the loss and the member's own profits.
  • A member's loss is surrendered to the consortium company. The claim is limited to the lower of the member's loss and the member's percentage share of the consortium company's profits.

If you are unsure of a rule, state the test you are applying and apply it clearly.

Key rules to remember

75% subsidiary
Parent holds ≥ 75% of ordinary share capital (plus ≥ 75% of distributable profits and of assets on a winding up)
Test for a group relief group. 75% exactly passes. Below 75% fails.
Effective interest
Effective % = % in first company × % in second company × ...
Multiply along the chain. The parent's effective interest in the lowest company must be at least 75% for group relief. Apply the same effective test to profits available for distribution and to assets on a winding up.
Group relief chain
Each link must be a 75% subsidiary AND the parent's effective interest in the lowest company ≥ 75%
Passing the link tests alone is not enough. If the effective test fails for top and bottom, the linked pairs (A and B, B and C) are still grouped.
Consortium company
Trading company that is not a 75% subsidiary of another company, with ≥ 75% of ordinary share capital beneficially owned between companies each holding ≥ 5%; or a trading company that is a 75% subsidiary of a non-trading holding company owned by a consortium
Member claiming the consortium company's loss: limit is the lower of the member's % of the loss and the member's profits. Member's loss surrendered to the consortium company: limit is the lower of the loss and the member's % of the consortium company's profits.
Group relief limit
Relief claimed ≤ lower of the loss available and the claimant's taxable profits
Losses and profits are matched for overlapping periods.

How to solve Groups and Overseas or Consortium Relationships questions

Use this order for any group or consortium question. Draw the structure first, then test each relationship.

  1. 1Draw a diagram of the companies with the percentage holdings on each link.
  2. 2Check each direct link: is the holder owning at least 75% of the ordinary shares? Mark it pass or fail.
  3. 3For indirect holdings, multiply the percentages along the chain and compare the result with 75%.
  4. 4Check residence. A non-UK company is in the group only if it trades in the UK through a permanent establishment, and only the losses of that UK trade qualify.
  5. 5If no 75% group exists, check whether the company is owned by a consortium: members' holdings and the 5% minimum.
  6. 6Identify which companies have losses and which have profits, and the overlapping periods.
  7. 7Compute the relief as the lower of the loss and the profit, applying the consortium member's percentage share to the loss or to the claimant's profits as relevant.
  8. 8State your conclusion in a sentence and show the percentage test beside it.

Quickest way: Link-by-link and multiply

When to use it: Use this for objective test questions asking whether two companies are in a group, or what the effective interest is.

  1. Write the percentages along the chain: e.g. 80%, 90%.
  2. Check every link is at least 75%.
  3. Multiply the percentages: 0.80 × 0.90 = 72%.
  4. Compare with 75%. Here it fails, so no group relief group between top and bottom companies.
  5. Look at the options: a trap answer usually uses only the link tests and ignores the multiplication.

Common mistakes in Groups and Overseas or Consortium Relationships

  • Using the 51% test for group relief

    Students mix up the different percentage tests learned in the group topics.

    Fix: For group relief the test is 75% of ordinary shares. The 51% test is a different group test, used for example in chargeable gains groups. Write '75% = group relief' in your notes.

  • Passing a chain because each link is 75% or more

    Students check links and stop.

    Fix: Multiply along the chain. 80% × 80% = 64%, which is below 75%, so the top and bottom companies are not grouped. Remember the same effective test applies to distributable profits and assets on a winding up. The linked pairs, such as A and B, and B and C, are still grouped.

  • Adding percentages instead of multiplying

    Mixed up with direct holdings held by two routes.

    Fix: Multiply along one chain. Only add the results from separate chains to the same company.

  • Including overseas companies in the UK group relief claim without checking for a UK permanent establishment

    Students see the word 'group' and assume all companies qualify, or assume no overseas company ever does.

    Fix: Note the residence of each company. A non-UK company qualifies only if it trades in the UK through a permanent establishment, and only the losses of that UK trade can be relieved.

  • Giving a consortium member relief on the whole loss

    Students forget relief follows ownership share.

    Fix: Multiply the consortium company's loss by the member's percentage holding. Then compare with the member's profits. For a member's loss surrendered to the consortium company, compare it with the member's percentage share of the consortium company's profits.

  • Treating exactly 75% as a fail

    Students read 'more than 75%'.

    Fix: The test is at least 75%. A 75% holding passes.

Worked examples

Example 1

A Ltd owns 80% of B Ltd. B Ltd owns 90% of C Ltd. All are UK resident. Are A Ltd and C Ltd in a 75% group for group relief?

Show the solution
  1. Link A to B: 80% is at least 75%, so B is a 75% subsidiary of A.
  2. Link B to C: 90% is at least 75%, so C is a 75% subsidiary of B.
  3. Effective interest of A in C: 80% × 90% = 72%.
  4. 72% is below 75%. The same effective test applies to profits available for distribution and assets on a winding up, so assume the holdings carry equal rights here.

Answer: No. A Ltd's effective interest in C Ltd is 72%, below 75%, so A and C are not in a group relief group. A and B remain a grouped pair, and B and C remain a grouped pair, so losses can still move between those pairs.

Example 2

X Ltd and Y Ltd each own 50% of Z Ltd, a UK trading company. Both X and Y are UK resident, and neither is in a group with the other. Z is not a 75% subsidiary of another company. Z has a trading loss of ₹8,00,000 in the year. X has taxable total profits of ₹10,00,000 in the same period. How much of Z's loss can X claim?

Show the solution
  1. Z is a trading company owned by two companies each holding at least 5%, together holding 100% of its ordinary share capital. It is not a 75% subsidiary of another company, so Z is a consortium company.
  2. X's share of the loss is 50% × ₹8,00,000 = ₹4,00,000.
  3. X's taxable total profits are ₹10,00,000, so they are not a limit here.
  4. The claim is the lower of ₹4,00,000 and ₹10,00,000.

Answer: X can claim ₹4,00,000 of Z's trading loss by consortium relief.

Exam tips

  • Draw the structure and write percentages on the arrows before you answer. It takes ten seconds and prevents errors.
  • In objective tests, the wrong options often use the 51% figure or skip the multiplication. Check both.
  • For consortium questions, find each member's share first, then apply the limit: the member's share of the loss against the member's profits, or the member's loss against the member's share of the consortium company's profits.
  • Write the test you applied in constructed responses, for example 'effective interest 72% < 75%'. Method marks depend on it.
  • For an overseas company, look for a UK permanent establishment. If there is one, only the losses of the UK trade qualify for relief. If there is none, the company is not in the group.

Practice questions from The effect of a group corporate structure for corporation tax purposes

Groups and Overseas or Consortium Relationships in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Groups and Overseas or Consortium Relationships: frequently asked questions

What is the difference between a 75% group and a 51% group in TX-UK?

A 75% group is the test for group relief of trading losses. The 51% test is a different group test, used for example in chargeable gains groups, and it is not the group relief test. Check which relief the question is about before choosing the percentage.

How do you calculate the effective 75% test?

Multiply the percentage holdings along the chain of ownership. For example 80% × 80% = 64%. The top company needs at least 75% effective interest in the lowest company for them to be grouped. The same effective test applies to profits available for distribution and assets on a winding up. Linked pairs that each pass, such as A and B, and B and C, are still grouped.

What is consortium relief in TX-UK?

A trading company that is not a 75% subsidiary of another company is owned by a consortium if at least 75% of its ordinary share capital is beneficially owned between companies that each hold at least 5%. A company is also owned by a consortium where it is a trading company that is a 75% subsidiary of a non-trading holding company owned by a consortium. A member can claim the consortium company's loss, limited to the lower of its percentage share of the loss and its own profits. A member's loss can be surrendered to the consortium company, limited to the lower of the loss and the member's percentage share of the consortium company's profits.

Can I claim group relief from an overseas subsidiary?

A non-UK resident company is in the group only if it trades in the UK through a permanent establishment. Only the losses of that UK trade qualify for relief. An overseas company with no UK permanent establishment is not in a group relief group.