Corporation tax – Group relief for ATX-UK

Part 1 of 4

This is the Finance Act 2023 version of this article. It is relevant for candidates sitting the ATX-UK exam in the period 1 June 2024 to 31 March 2025. Candidates sitting ATX-UK after 31 March 2025 should refer to the Finance Act 2024 version of this article (to be published on the ACCA website in 2025).

Groups of companies are an important aspect of corporation tax within the ATX-UK exam. Having studied the basics of this area at TX-UK you are now expected to progress to more advanced aspects. However, the basic rules continue to be of vital importance as they are the foundation on which the additional rules rest. You must have a sound knowledge of the many rules within this subject if you are to be able to handle an exam question involving groups.

This is not an introductory article; it is relevant to students coming to the end of their studies and finalising their preparations to sit the exam. It begins by briefly summarising the rules relating to both group relief groups and chargeable gains groups. It then goes on to consider a number of group relief tax planning issues that could feature in an exam question. It does not include comprehensive explanations of the rules but assumes a reasonable knowledge.

This article is intended to be read proactively, ie statements made should be confirmed as true by reference to the reader’s understanding of the rules, or to a relevant study text. This approach will enable future situations to be analysed from first principles rather than by reference to a rigid set of memorised planning points.

The tax rates and limits for financial year 2023, ending on 31 March 2024, are used throughout this article.

The basic rules

Figure 1 shows the structure of the H Ltd group of companies. It should be assumed that all of the companies in the group are resident in the UK. The minority shareholders in the group companies are companies with no relationship with H Ltd.

You should be able to review the group structure and confidently identify the members of any group relief groups and capital gains groups; do this before you read the information in Table 1.

Figure 1: The structure of the H Ltd group of companies

Table 1: Group relief and chargeable gains groups re Figure 1

Once a group relief group exists, the following applies:

• In broad terms, any company in the group can surrender current period and brought forward trading losses, non-trading deficits on loan relationships, excess property business losses, excess management expenses, and excess gift aid donations to any other company in the group.
• A company cannot surrender losses carried forward where they could be deducted from its own profits.
• The maximum claim by a group company is that company’s taxable total profits. For this purpose, a claimant company’s taxable total profits figure is after the deduction of its own losses to the fullest extent possible.
• A question will not be set involving carried forward losses which were created prior to 1 April 2017.
• There is a restriction on the amount of carried forward losses which can be offset for companies which have profits in excess of £5 million. The details of this restriction are not examinable at ATX-UK.

Conclusion

It is vital to be able to identify the members of a group relief group and a capital gains group. It is then necessary to consider the planning opportunities available to the companies concerned. These opportunities are considered in the remaining parts of this article.

Note: Corporation tax issues are considered in two further articles:

• Corporation tax for ATX-UK
• Corporation tax – Groups and chargeable gains for ATX-UK

Written by a member of the ATX-UK examining team

The comments in this article do not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content of this article as the basis of any decision. The authors and ACCA expressly disclaim all liability to any person in respect of any indirect, incidental, consequential or other damages relating to the use of this article.