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

Group Relief and Corporation Tax Groups for ACCA Taxation (UK)

Updated 11 October 2026 · Fact-checked

Group relief lets a company in a 75% group surrender its current-period trading loss to another group company, which deducts it from its total profits. Associated companies, broadly those under common control, divide the £50,000 and £250,000 limits and the £1,500,000 instalment threshold by the number of associated companies.

Understand Group Relief and Corporation Tax Groups

A company's trading loss is normally relieved against its own profits. If it has no profits, the relief is wasted or carried forward. Group relief fixes this. It lets one company in a group pass a loss sideways to a profitable group company, so the group pays less corporation tax now.

The surrendering company has the loss. The claimant company has the profits and claims the loss. Both must be in a 75% group. A parent must own at least 75% of the ordinary share capital of each direct subsidiary. For an indirect subsidiary, each link in the chain must be at least 75%, and the parent's effective interest must be more than 50%. For example, if A owns 75% of B and B owns 75% of C, A's effective interest in C is 56.25%. A, B and C are all in a group relief group. Two subsidiaries of the same parent are also in a group with each other.

Relief is for corresponding accounting periods only. If the two companies' periods do not line up, you time-apportion both the loss and the profits and use only the overlap. The claimant can deduct no more than its own taxable total profits for that overlap. The surrendering company cannot surrender any part of the loss it has already used against its own profits.

Associated companies are a separate idea with a lower ownership test. Companies are associated when one controls the other, or both are controlled by the same person or persons. Control means more than 50%. Associated companies share the corporation tax limits. The lower limit of £50,000 and the upper limit of £250,000 are divided by the number of associated companies, counting the company itself. The £1,500,000 quarterly instalment profit threshold is divided in the same way. The limits also affect marginal relief.

Remember the two tests are different. A 60% subsidiary is associated, so it shrinks the limits. It is not in the 75% group, so you cannot exchange losses with it. In a consortium, a company owned by a consortium of companies can have losses relieved against the profits of consortium members, limited to each member's share of ownership.

Key rules to remember

75% group test: Direct subsidiary: holding ≥ 75%. Indirect subsidiary: every link ≥ 75% and parent's effective interest > 50%; For an indirect holding, test each link in the chain for at least 75%. Then multiply the percentages down the chain: the effective interest need only be more than 50%. Two subsidiaries of the same parent are also grouped.
Maximum group relief claim: Lower of: (i) surrendering company's available loss, and (ii) claimant's taxable total profits before group relief; Use only the overlap of corresponding accounting periods. Time-apportion if the periods differ.
Associated company test: Control of more than 50%, or both under common control; Count the company itself. Dormant companies are ignored. Overseas companies count for the limits.
Adjusted limits: Limit ÷ number of associated companies (including the company itself); Applies to the £50,000 lower limit, the £250,000 upper limit and the £1,500,000 quarterly instalment threshold.
Marginal relief: (Upper limit − augmented profits) × 3/200 × taxable total profits ÷ augmented profits; Applies when augmented profits fall between the adjusted lower and upper limits. Use adjusted limits and the standard fraction 3/200.
Corporation tax rates: Small profits rate 19%; main rate 25%; Between the limits, tax at 25% and deduct marginal relief.

How to solve Group Relief and Corporation Tax Groups questions

Use this order for any group relief or associated company question.

1List the companies and write down the ownership percentages. Draw a quick group diagram.
2Test for a 75% group. Check that direct holdings are at least 75%. For indirect chains, check that each link is at least 75% and that the effective interest (the percentages multiplied down the chain) is more than 50%. Only companies in the group can exchange losses.
3Test for associated companies using the more than 50% control test. Exclude dormant companies. Count the company itself.
4Adjust the limits: divide £50,000, £250,000 and £1,500,000 by the number of associated companies. Time-apportion for periods under 12 months.
5Identify the loss and its period. Match the surrendering and claimant periods and time-apportion if they do not coincide.
6Find the maximum claim: the lower of the available loss and the claimant's taxable total profits for the overlap. Decide who should claim, usually the company with profits taxed at the highest rate.
7Recompute the claimant's corporation tax with the relief deducted. Apply the rate and marginal relief with the adjusted limits.
8State any unused loss and what happens to it, for example carried forward by the surrendering company.

Quickest way: Count, limit, then claim

When to use it: Use this for Section A and OT case questions where you need one number quickly.

Count associated companies first. Over 50% control counts, dormant companies do not, and add one for the company itself.
Divide £50,000 and £250,000 by that count. Divide £1,500,000 by the count for the instalment test.
Check 75% separately before moving any loss between companies.
Take the lower of the loss and the claimant's profits for the matching period.
If profits fall between the adjusted limits, tax at 25% and subtract marginal relief.

Common mistakes in Group Relief and Corporation Tax Groups

Using 75% to decide whether companies are associated.
Both tests involve company ownership, so students mix them up.
Fix: Use over 50% control for associated companies and limits. Use at least 75% for group relief only.
Forgetting to count the company itself when dividing the limits.
Students count only the other companies.
Fix: Divide by the total number of associated companies including the one you are computing. A company with two associates has three in total.
Surrendering more loss than the claimant has profits.
Students move the whole loss without a limit check.
Fix: Cap the claim at the claimant's taxable total profits for the overlap period. Carry any unused loss forward in the surrendering company.
Ignoring period mismatches.
Students assume both companies have the same year end.
Fix: Time-apportion the loss and the profits over the corresponding period, then use only the overlap.
Counting dormant companies as associated.
Students only look at share ownership.
Fix: Dormant companies are ignored for the limits. Check the question wording for the word dormant.
Using unadjusted limits in marginal relief.
Students adjust the limits for the rate test but then revert to £250,000 in the formula.
Fix: Use the adjusted upper limit in the marginal relief formula, and the adjusted lower limit to test whether it applies.

Worked examples

Example 1

P Ltd owns 80% of the ordinary shares in S Ltd. There are no other group companies. For the year to 31 March 2026, P Ltd has taxable total profits of £180,000 and no dividends. S Ltd has a trading loss of £70,000 and no other income. Calculate P Ltd's corporation tax if S Ltd surrenders its whole loss, and the tax saved compared with no claim.

Show the solution

P Ltd owns at least 75% of S Ltd, so they are a 75% group and group relief is available. The periods coincide.
Associated companies: P Ltd and S Ltd, so two. The limits halve: lower limit £25,000 and upper limit £125,000.
Without relief: profits of £180,000 exceed £125,000, so tax is £180,000 × 25% = £45,000.
The maximum claim is the lower of the loss (£70,000) and P Ltd's profits (£180,000), so £70,000.
Profits after relief: £180,000 − £70,000 = £110,000. This is between £25,000 and £125,000, so marginal relief applies.
Tax at 25%: £110,000 × 25% = £27,500.
Marginal relief: (£125,000 − £110,000) × 3/200 × (£110,000 ÷ £110,000) = £15,000 × 0.015 = £225.
Tax payable: £27,500 − £225 = £27,275. Saving: £45,000 − £27,275 = £17,725.

Answer: P Ltd's corporation tax is £27,275, a saving of £17,725 against no claim.

Example 2

X Ltd owns 100% of Y Ltd, 60% of W Ltd and 100% of Q Ltd, which is dormant. X Ltd has an accounting period of 12 months and augmented profits of £600,000. Find the adjusted lower and upper limits and the quarterly instalment threshold. State whether X Ltd must pay by instalments, and whether X Ltd can claim group relief for a loss in W Ltd.

Show the solution

Associated companies: X Ltd, Y Ltd and W Ltd. Q Ltd is dormant and ignored. W Ltd is associated because X Ltd controls it (more than 50%). Total: 3.
Lower limit: £50,000 ÷ 3 = £16,667 (rounded).
Upper limit: £250,000 ÷ 3 = £83,333 (rounded).
Instalment threshold: £1,500,000 ÷ 3 = £500,000.
Augmented profits of £600,000 exceed £500,000, so X Ltd is large for instalment purposes and should pay by quarterly instalments. Check the question for any further rules on very large companies.
Group relief with W Ltd: X Ltd owns only 60%, below 75%, so W Ltd is not in the group. No loss can be exchanged with W Ltd, even though it is associated.

Answer: Adjusted limits are £16,667 and £83,333. The instalment threshold is £500,000, so X Ltd pays by quarterly instalments. Group relief with W Ltd is not available because the holding is under 75%.

Exam tips

Write the 75% test and the more than 50% test side by side in your working. Examiners set questions where a 60% company is associated but not grouped.
Always show the count of associated companies. Method marks are often given even if the later arithmetic slips.
In Section C, state which company claims and why. Say that the claim is capped at the claimant's profits and note the unused loss.
For Section A and OT case questions, check the accounting period length and dormant wording before you divide any limits.
Take the rates and the 3/200 fraction from the tax rates table given in the exam. Your job is to apply the adjusted limits correctly.

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

Group Relief and Corporation Tax Groups in other exams

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

ACCA Strategic ProfessionalGroups: Group Relief, Gains Groups and Stamp Taxes

Group Relief and Corporation Tax Groups: frequently asked questions

What is the 75% group requirement for group relief?

A parent must own at least 75% of the ordinary share capital of each direct subsidiary. For an indirect subsidiary, each link in the chain must be at least 75%, and the parent's effective interest must be more than 50%. For example, 75% of 75% gives 56.25%, so all three companies are in the group. Two subsidiaries of the same parent are also in a group.

What is the difference between group relief and a loss carried forward?

Group relief passes a current-period loss to another group company to use against its profits straight away. A carried-forward loss stays with the company that made it and is used against its own later profits. A company with a loss it expects to use soon may prefer to keep it, but surrendering saves tax sooner when another company has profits taxed at 25%.

How do associated companies affect corporation tax limits?

The £50,000 and £250,000 limits are divided by the number of associated companies, including the company itself. The £1,500,000 quarterly instalment threshold is divided in the same way. This can push profits into the main rate or marginal relief band earlier.

What is consortium relief?

It applies where a company is owned by a consortium of companies. Losses can be relieved between the consortium company and its members, limited to each member's ownership share. It is a separate relief from the 75% group rules, so check the ownership conditions given in the question.