Taxation (UK) · The use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Capital Losses and Group Relief for Gains in TX-UK

Updated 11 October 2026 · Fact-checked

A company sets current-year capital losses against current-year gains, then carries unused losses forward against later gains. It cannot use them against income. In a 75% group, assets move at no gain no loss, and two companies can jointly elect that a gain or loss on a sale outside the group accrues to another member.

Understand Capital Losses and Group Relief for Gains

A company's chargeable gains are taxed as part of its profits. A company has no annual exempt amount. Corporation tax is charged at the rates that apply to the company's taxable total profits, with the £50,000 and £250,000 limits divided by the number of associated companies. So the main planning question is how to use capital losses.

A capital loss can only be set against chargeable gains. It cannot reduce trading profit, property income or other income. The loss is first set against gains of the same accounting period. Any unrelieved loss is carried forward and set against the first available gains of later periods. This relief is automatic and full. The company cannot restrict the claim or leave a loss unused to protect an exemption, because it has no annual exempt amount to protect. A loss is also not carried back.

Groups add two more tools. For chargeable gains, a group is a company and its 75% subsidiaries. A 75% subsidiary is one where the parent holds at least 75% of the ordinary share capital, directly or indirectly. For indirect holdings, the parent must also have an effective interest of more than 50%. Assets transfer between group companies at no gain no loss. The transferor is treated as selling for the amount that gives neither a gain nor a loss, and the transferee takes over that original cost base. The gain or loss only arises when the asset leaves the group.

The second tool is the joint election. When a group company sells an asset outside the group, it and another group company can jointly elect that the whole or part of the gain or loss on that sale is treated as accruing to the other company. This lets the group put a gain into a company with spare capital losses. The election brings the use of the loss forward and matches the gain with the loss, which is a timing benefit. Capital losses cannot be surrendered directly between group companies. A no gain no loss transfer of an asset does not move a capital loss either.

Exam questions usually give several group companies with sales, gains and brought-forward losses. Your job is to compute each company's gains, use losses in the right order and suggest a sensible election.

Key rules to remember

Use of current-year capital losses: Current-year gains − current-year capital losses = net chargeable gains; Losses are set only against chargeable gains, never against income. For a company, this relief is automatic and cannot be restricted.
Brought-forward capital losses: Net chargeable gains for the period − brought-forward losses = gains in taxable total profits; Brought-forward losses are used against the first available gains. They can be carried forward indefinitely, provided the company remains within the charge.
No gain no loss group transfer: Deemed proceeds = original cost; The transferee takes over the transferor's original cost. Tax arises only on a later sale outside the group.
Capital gains group test: 75% subsidiary = parent holds at least 75% of the ordinary share capital, directly or indirectly; For indirect holdings, the parent must also have an effective interest of more than 50%. A company that meets both tests is in the capital gains group.
Joint election on a sale outside the group: Gain or loss on a sale outside the group by one company is treated as accruing to another group company; Both companies must jointly elect. The election can cover the whole or part of the gain or loss. It lets the group use capital losses in a suitable company. It does not move capital losses already brought forward.

How to solve Capital Losses and Group Relief for Gains questions

Use this approach for any question on company capital losses and group gains.

1Identify which companies are in the capital gains group. Check that the parent holds at least 75% of the ordinary share capital of each subsidiary. For indirect holdings, also check that the parent's effective interest is more than 50%.
2List each disposal and say whether it is to a group company or to an outsider. A group transfer is no gain no loss.
3Compute the gain or loss on each outside sale as proceeds less allowable cost, unless the question says otherwise.
4For each company, net the current-year gains and losses first. Then deduct any brought-forward capital losses, but not below zero.
5Carry forward any remaining capital loss. Do not try to set it against income or carry it back.
6Decide whether a joint election would help. Consider moving a gain to a company with a loss, or a loss to a company with a gain. The benefit is that the loss is used now rather than carried forward.
7Add the net gain to the company's other profits to produce taxable total profits. Apply the corporation tax rates that fit those profits, with the limits divided by the number of associated companies.
8State your conclusion clearly: net gain for each company, loss carried forward, and any election recommended.

Quickest way: Company-by-company loss grid

When to use it: Use this when a question has three or more group companies and you have limited time.

Draw a small grid with one column per company.
Write the current-year gains, current-year losses and brought-forward losses in rows.
Net the current-year figures, then deduct brought-forward losses down to zero.
Ask whether any column has a spare loss and another has a taxable gain.
If yes, state that a joint election could move the gain or loss. Then calculate the combined effect of the election.
Write the carried-forward loss under each column.

Common mistakes in Capital Losses and Group Relief for Gains

Setting a capital loss against trading profit or other income.
Students mix up capital losses with trading losses, which have wider relief.
Fix: Remember that a capital loss can only be set against chargeable gains. Check the loss type before using it.
Carrying a current-year capital loss back to an earlier period.
Students confuse capital losses with trading loss carry-back rules.
Fix: Capital losses are used against current gains first and then carried forward only.
Treating a transfer between group companies as a normal sale with a gain or loss.
Students compute proceeds minus cost without noticing that both companies are in a group.
Fix: If both companies are in the same capital gains group, treat the transfer as no gain no loss. Use the transferor's original cost.
Assuming group members can pool capital losses automatically.
Students mix capital loss rules with group relief for trading losses.
Fix: Capital losses cannot be surrendered between group companies. The group can instead use a joint election on a sale outside the group, or transfer the asset at no gain no loss to the company with unused losses before it is sold outside the group. A no gain no loss transfer of an asset does not move a capital loss itself.
Applying an annual exempt amount to a company's gains.
Students carry over personal capital gains tax rules.
Fix: A company has no annual exempt amount. Its gains are included in profits and taxed at corporation tax rates.
Forgetting that brought-forward losses are set automatically and in full against the first available gains.
Students think they can choose which gains to relieve or restrict the claim.
Fix: Deduct brought-forward losses after current-year netting, up to the net gain available. The relief is automatic and full. The company cannot restrict the claim or leave gains unrelieved.

Worked examples

Example 1

Alpha Ltd has a chargeable gain of £90,000 and a chargeable loss of £25,000 in the year to 31 March 2026. It also has a capital loss of £30,000 brought forward. Calculate the gains included in taxable total profits and any loss carried forward.

Show the solution

Net the current-year figures: £90,000 − £25,000 = £65,000.
Deduct the brought-forward loss: £65,000 − £30,000 = £35,000.
The brought-forward loss is fully used, so none is carried forward.

Answer: £35,000 of gains are included in taxable total profits, and no capital loss is carried forward.

Example 2

Beta Ltd and Gamma Ltd are in the same capital gains group. In the current year, Beta Ltd sells land to an outsider and makes a chargeable gain of £80,000. Gamma Ltd sells shares to an outsider and makes a capital loss of £50,000. Explain the effect of a joint election and calculate the net gain.

Show the solution

Without the election, each company is dealt with separately. Beta Ltd is taxed on its £80,000 gain this year.
Without the election, Gamma Ltd has no gain this year to set its loss against. The £50,000 loss is not lost: it is carried forward for use against Gamma Ltd's later gains.
With a joint election, Beta Ltd and Gamma Ltd jointly elect that the £80,000 gain on Beta Ltd's sale of the land is treated as accruing to Gamma Ltd instead of Beta Ltd.
Gamma Ltd sets its £50,000 current-year loss against that gain: £80,000 − £50,000 = £30,000. Beta Ltd then has no gain.
So £30,000 is chargeable this year instead of £80,000. The £50,000 loss is used now instead of being carried forward. The total gains taxed over time are the same either way. The benefit is earlier relief only, a timing benefit, not a permanent saving.

Answer: With the joint election, the net chargeable gain this year is £30,000 (in Gamma Ltd) and the £50,000 loss is used now. Without it, £80,000 is chargeable on Beta Ltd now and Gamma Ltd carries forward its £50,000 loss for later gains. The total gains taxed over time are the same, so the election gives earlier relief only.

Exam tips

Show the group test. Write 'at least 75% subsidiary, so no gain no loss applies' before computing the transfer.
State clearly where a loss is trapped. Examiners reward the point that capital losses cannot be set against income.
When a question includes a group, look for a possible joint election. It is often the intended planning point.
Lay out your answer company by company. A short table or neat list makes it easier to award follow-through marks.
In objective tests, read the type of loss carefully. Capital loss and trading loss rules lead to different answers.

Practice questions from The use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Capital Losses and Group Relief for Gains in other exams

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

Capital Losses and Group Relief for Gains: frequently asked questions

Can a company carry back a capital loss?

No. A company sets a capital loss against gains of the same period first. Any unused loss is carried forward against later gains. It is not carried back.

Can a company set capital losses against trading profits?

No. Capital losses can only be set against chargeable gains. If you need relief against income, you must have a different type of loss, such as a trading loss.

What does no gain no loss mean in a group?

It means an asset transferred between group companies is treated as sold for an amount that creates neither a gain nor a loss. The receiving company takes over the original cost. Tax is only calculated when the asset is sold outside the group.

What is a joint election for gains in a group?

It is an agreement between two group companies. When one of them sells an asset outside the group, the whole or part of the gain or loss on that sale is treated as accruing to the other company. It lets the group match a gain with capital losses in the company where they are most useful.