Skip to content

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

Delta Ltd owns 80% of Epsilon Ltd. Epsilon Ltd sold a building in the year to 31 March 2026 and made a chargeable gain of £120,000. Delta Ltd sold shares in the same year and made a capital loss of £70,000. Neither company has other gains or losses, and there is no election in place. How can the group deal with the loss?

The two companies can jointly elect to transfer Delta Ltd's £70,000 loss to Epsilon Ltd, reducing Epsilon's gain to £50,000. Group members may reallocate gains and losses by election, but the set-off does not happen automatically.

  1. ADelta Ltd's loss is carried back three years against earlier gains of Epsilon Ltd
  2. BDelta Ltd's loss can only be set against its own gains and is carried forward
  3. CDelta Ltd and Epsilon Ltd may jointly elect to transfer the loss to Epsilon Ltd so it is set against the £120,000 gain, leaving a net gain of £50,000Correct
  4. DDelta Ltd's loss is automatically set against Epsilon Ltd's gain with no election required

Explanation

Within a capital gains group, a gain or loss can be reallocated between members by a joint election, so the £70,000 loss can be set against Epsilon's £120,000 gain, leaving £50,000. It is not automatic, so the last option is wrong. Capital losses are not carried back by companies.

Did you get it right without looking?

One question tells you little. A timed set on The effect of a group corporate structure for corporation tax purposes shows your real accuracy, how long you take and where you lose marks.

Practise The effect of a group corporate structure for corporation tax purposesFree diagnostic mock

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