Advanced Taxation (UK) · Corporation tax: the use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Group Relief and Capital Gains Group Reliefs for ACCA ATX

Updated 11 October 2026 · Fact-checked

Group relief lets companies in a 75% group move current-period trading losses and similar amounts to a profitable company to cut its corporation tax. Chargeable gains groups work differently: assets move between members at no gain no loss, gains and losses can be reallocated by election, and a degrouping charge can arise on leaving within six years.

Understand Group Relief and Capital Gains Group Reliefs

A company pays corporation tax on its own profits. Without group rules, a loss in one company would be stuck there while a sister company pays tax on its profits. UK law lets related companies share certain losses and gains so the group is taxed more like one business.

There are two separate systems. Group relief is about income losses. Chargeable gains group rules are about capital assets. They use different tests, so keep them apart. Group relief needs a 75% group, tested through ordinary share capital, entitlement to profits available for distribution and entitlement to assets on a winding up. The gains group is built from a principal company and its 75% subsidiaries. Indirect subsidiaries are included only if the principal company has an effective interest of more than 50% in them.

Under group relief, a loss-making company surrenders a loss and a profitable company claims it. The claimant can only use it against its own taxable total profits of the corresponding period. Accounting periods that do not match are time-apportioned, using whole months. Consortium relief works in a similar way for a company owned by a consortium of companies, but relief is limited by the percentage each member holds.

For gains, a transfer of an asset between group members is treated as no gain no loss. The receiving company takes over the transferor's cost. Tax is only triggered on a sale outside the group. The group can also elect jointly to treat a gain or loss on an outside sale as arising in another member, which lets you use losses or lower tax rates. Replacement assets bought by any member can also qualify for rollover relief.

The catch is the degrouping charge. If a company leaves the group within six years of receiving an asset by a no gain no loss transfer, and still owns that asset, it is treated as if it had sold and reacquired the asset at market value when it received it. The gain is calculated at the date of the original transfer, not the date of leaving. In a share sale, the gain is normally added to the sale proceeds of the shares, so the substantial shareholding exemption can cover it if its conditions are met.

Key rules to remember

Group relief group test: Parent holds ≥ 75% of ordinary share capital, and is entitled to ≥ 75% of profits available for distribution and ≥ 75% of assets on a winding up; For indirect holdings, multiply the percentages through the chain. All three tests must be met.
Maximum group relief claim: Lower of (surrendering company's loss for the overlap) and (claimant's taxable total profits for the overlap); Overlap = months common to both accounting periods. Apportion each figure by months ÷ length of its own period.
Consortium relief limit: Relief ≤ member's % holding × loss of the consortium company, and ≤ claimant's profits; The same percentage limit applies in the other direction when a member's loss is surrendered to the consortium company.
Gains group test: Principal company + its 75% subsidiaries + 75% subsidiaries of those, if principal company's effective interest in them is > 50%; This is not the same as the group relief test. A company can be in one group but not the other.
No gain no loss transfer: Transferee's cost = transferor's original cost (no gain, no loss arises); Applies to intra-group transfers of chargeable assets, so the gain is deferred until an outside sale.
Degrouping charge: Gain = market value at date of intra-group transfer − transferor's cost (adjusted as the transferor's base cost); Arises if the company leaves the group within 6 years of the transfer while holding the asset. Usually added to the proceeds of the share sale.
Election to reallocate a gain or loss: Joint election by the two companies within 2 years of the end of the accounting period of the outside disposal; Moves a gain or loss to another group member, for example to use losses or lower tax rates.
Corporation tax rates and marginal relief: Small profits rate 19%; main rate 25%; marginal relief = (Upper limit − Augmented profits) × 3/200 × Taxable total profits ÷ Augmented profits; Limits are £50,000 and £250,000, divided by the number of associated companies. Effective marginal rate in the band is 26.5%.

How to solve Group Relief and Capital Gains Group Reliefs questions

Use this order for any group question. It separates the two systems and stops you claiming reliefs the companies do not qualify for.

1Draw the structure with percentages. Mark direct and indirect holdings and multiply through chains.
2Test each relationship separately: 75% for group relief, 75% with effective interest above 50% for the gains group. Note which companies qualify for which.
3For losses, identify the type and the period. Match accounting periods and work out the overlap in months.
4Compute the maximum claim for each pair: lower of the surrenderable loss and the claimant's profits, both apportioned for the overlap.
5Choose the best claimant. Aim first for profits taxed at 26.5% in the marginal band, then 25%, then 19%. Check the associated company count for the limits.
6For asset transfers, apply no gain no loss, then check whether any company leaves within six years while holding the asset.
7If there is a degrouping charge, compute it at the original transfer date, say whose computation it falls in, and consider SSE, reallocation by election and rollover relief.
8Finish with the tax effect in pounds and state any assumption you made.

Quickest way: Two-test shortcut: group relief or gains first

When to use it: Use this when a Section A scenario has several companies and you must quickly decide who can do what.

Write the percentage next to each company and ask: is it 75% or more? If yes, group relief is possible.
For gains, ask the same, then check effective interest above 50% for any indirect company.
For group relief, write the loss and profit side by side with the months of overlap. The claim is the lower figure.
Rank claimants by tax rate and surrender to the highest first.
Scan every asset transfer for a company leaving within six years. If one does, compute the degrouping gain.
Add one sentence on consortium rules or elections if the scenario hints at them.

Common mistakes in Group Relief and Capital Gains Group Reliefs

Using the same group definition for losses and gains.
Both topics use 75%, so students assume they are identical.
Fix: Test the group relief group on ordinary shares, profits and assets. For gains, add the effective interest above 50% test for indirect subsidiaries.
Surrendering a full-year loss when accounting periods do not match.
Students forget that only the overlap months qualify.
Fix: Time-apportion both the loss and the claimant's profits to the overlap by months. Unrelieved loss may be carried forward or used in another overlap period.
Claiming group relief for more than the claimant's taxable profits.
Focus on the size of the loss rather than what can be absorbed.
Fix: Cap the claim at the claimant's profits for the overlap. The excess stays with the loss company.
Calculating the degrouping gain using market value at the date of leaving.
It feels natural to use the most recent value.
Fix: Use market value when the asset was transferred into the company, less the transferor's cost. Check the six-year window as well.
Applying group relief to capital losses.
Both are group reliefs, so students mix them up.
Fix: Capital losses can only be used against chargeable gains. They may be moved within the gains group, often by joint election, but never by group relief.
Ignoring associated companies when picking the claimant.
Students use the full £50,000 and £250,000 limits automatically.
Fix: Divide the limits by the number of associated companies, then work out which company has the highest marginal rate.

Worked examples

Example 1

S Ltd is 80% owned by P Ltd. S Ltd has a trading loss of £120,000 for the year to 31 December 2025. P Ltd has taxable total profits of £400,000 for the year to 31 March 2026 and pays tax at the main rate. T Ltd, 60% owned by P Ltd, has profits of £100,000. Assume P Ltd has no associated companies other than S Ltd and T Ltd. Explain what group relief is available and the tax saved.

Show the solution

P Ltd holds 80% of S Ltd, so S Ltd is in a group relief group with P Ltd (assuming the profit and asset tests are also at least 75%).
T Ltd is only 60% owned, so T Ltd is not in the group relief group with S Ltd or P Ltd. It is still an associated company of P Ltd because P Ltd controls it.
Assumption: P Ltd has no associated companies beyond S Ltd and T Ltd. With P, S and T, the limits are divided by 3: £50,000 ÷ 3 = £16,667 and £250,000 ÷ 3 = £83,333.
P Ltd's profits of £400,000 are well above £83,333, so its profits are taxed at the 25% main rate.
Overlap of periods: 1 April 2025 to 31 December 2025 = 9 months.
S Ltd loss for the overlap = £120,000 × 9/12 = £90,000.
P Ltd profits for the overlap = £400,000 × 9/12 = £300,000.
Maximum claim = lower of £90,000 and £300,000 = £90,000.
Tax saved = £90,000 × 25% = £22,500.
The remaining loss of £30,000 relates to 1 January to 31 March 2025. It can be claimed against P Ltd's profits for the year to 31 March 2025 (a 3 month overlap) if P Ltd has profits available for that period. Otherwise S Ltd carries it forward. The question gives no figures for P Ltd's profits for that earlier year, so no tax saving is calculated for this £30,000.

Answer: S Ltd can surrender £90,000 to P Ltd, saving corporation tax of £22,500 at 25%. The remaining £30,000 can be claimed against P Ltd's profits for the year to 31 March 2025 if available, otherwise S Ltd carries it forward. No tax figure can be given for it. T Ltd cannot claim, because it is not in a 75% group with S Ltd.

Example 2

A Ltd owns all the shares in B Ltd. On 1 June 2023 A Ltd transferred land with a cost of £100,000 to B Ltd. The market value was £250,000 on that date and £300,000 on 1 December 2025. On 1 December 2025 A Ltd sold all its shares in B Ltd to an unconnected company, X plc, for £2,000,000. B Ltd still owns the land. Assume the substantial shareholding exemption does not apply, and that A Ltd pays corporation tax at the 25% main rate, for example because its profits exceed the upper limit. Explain the tax effect of the land transfer and compute any degrouping charge and the tax cost.

Show the solution

The transfer on 1 June 2023 was between members of a gains group, so it was treated as no gain no loss and B Ltd took over a base cost of £100,000.
B Ltd left the group on 1 December 2025, which is 2 years and 6 months after the transfer. This is within 6 years and B Ltd still owns the land, so a degrouping charge arises.
B Ltd is treated as having sold and reacquired the land at market value on 1 June 2023. Gain = £250,000 − £100,000 = £150,000.
The market value of £300,000 on 1 December 2025 is not used.
Because A Ltd is selling the shares in B Ltd, the gain is normally added to A Ltd's disposal proceeds for the B Ltd shares, so proceeds for the share sale are treated as £2,150,000.
Assumption: A Ltd pays corporation tax at the 25% main rate, for example because its profits exceed the upper limit. With no SSE, the extra gain of £150,000 is taxed at 25%, giving tax of £150,000 × 25% = £37,500.
Planning point: if SSE applied to the sale of the B Ltd shares, the added gain would fall within the exemption, and no degrouping charge would arise in practice. Joint election and rollover relief might also help.

Answer: The degrouping gain is £150,000. The tax cost, assuming no SSE and that A Ltd pays tax at the 25% main rate, is £37,500 (25% of £150,000), included in A Ltd's computation on the share sale.

Exam tips

Draw the group structure first and write each percentage on it. Most marks are lost by testing the wrong company or the wrong percentage.
State the test you are applying in words, for example: the 75% group relief test needs ordinary shares, profits and assets. This earns easy technical marks.
Show the months of overlap and your apportionments clearly. Markers give credit for method even if a figure is wrong.
In planning requirements, rank companies by tax rate and mention marginal relief. Then explain your recommendation in a short sentence to earn professional skills marks.
Always check the six-year rule for any company leaving, and say whether SSE could remove the charge.

Practice questions from Corporation tax: the use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Group Relief and Capital Gains Group Reliefs in other exams

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

ACCA Applied SkillsGroup Relief and Corporation Tax Groups

Group Relief and Capital Gains Group Reliefs: frequently asked questions

What is the 75% subsidiary condition for group relief?

A company is a 75% subsidiary if its parent holds at least 75% of its ordinary share capital. The parent must also be entitled to at least 75% of the profits available for distribution and at least 75% of the assets on a winding up. For indirect holdings, the percentages are multiplied through the chain.

What is the difference between group relief and the gains group rules?

Group relief moves income-type losses between companies in a 75% group to cut the tax on current-period profits. The gains group rules treat asset transfers as no gain no loss and let the group reallocate gains and losses on outside sales. Group relief cannot be used for capital losses. The gains group also has a test of effective interest above 50% for indirect subsidiaries.

How do I calculate a degrouping charge?

Check that the company left the group within six years of an intra-group transfer and still owns the asset. Then take market value at the date of that transfer and deduct the transferor's cost. This gain is normally added to the proceeds of the share sale, so SSE can exempt it if its conditions are met.

Can a gain be moved to another group company?

Yes. Two members of the gains group can jointly elect to treat a gain or loss on an outside disposal as arising in another member. The election must be made within two years of the end of the accounting period of the disposal. It is often used to use capital losses or to benefit from lower rates.