Pillar Guide · Updated June 2026
UK Group Company Tax Planning Guide 2026/27
UK groups of companies can access significant tax efficiencies that are unavailable to standalone entities -- but the rules are complex and require careful planning. Group relief allows trading losses to be transferred between 75%-owned group members, reducing the group's overall Corporation Tax bill immediately. VAT group registration eliminates VAT on intra-group supplies and consolidates filing -- available to groups of any size. Transfer pricing requires intra-group transactions to be priced at arm's length following OECD guidelines. The Corporation Tax marginal relief thresholds (£50,000/£250,000) are divided by the number of associated companies, meaning a group of 4 companies has lower limits of £12,500 and £62,500 per member. This guide covers group relief, consortium relief, VAT groups, transfer pricing, group payment arrangements and the associated companies impact on marginal relief for 2026/27.
Key figures at a glance -- 2026/27
- Group relief ownership test: 75% of ordinary share capital (direct or indirect)
- Consortium relief minimum: each member holds at least 5% but no single member holds more than 75%
- VAT group threshold: none -- any size of group can register
- Transfer pricing standard: OECD arm's length principle
- Marginal relief lower limit per member: £50,000 / number of associated companies
- Marginal relief upper limit per member: £250,000 / number of associated companies
- CT small profits rate: 19% (up to lower limit)
- CT main rate: 25% (above upper limit)
Group Relief -- 75% Ownership
Group relief allows one UK group company (the surrendering company) to transfer its current-year trading losses to another UK group company (the claimant company) to reduce the claimant's taxable profits and Corporation Tax liability. The relief means the group does not wait for the loss-making company to carry forward losses -- the tax benefit is realised in the same year as the loss.
To qualify, the surrendering and claimant companies must be members of the same group. This requires:
- 75% ordinary share capital ownership -- the parent must own at least 75% of the subsidiary's ordinary share capital, directly or indirectly through the chain.
- 75% profits entitlement -- the parent must be entitled to at least 75% of profits available for distribution.
- 75% assets entitlement -- the parent must be entitled to at least 75% of assets on a winding up.
Types of losses surrenderable via group relief include: current-year trading losses, excess capital allowances over trading income, non-trading loan relationship deficits, management expenses (investment companies), and qualifying charitable donations. The surrendering company receives no payment for the loss surrender in commercial practice (though an informal payment is common to compensate the surrendering company's cash position).
Group relief claims are made in the CT600 of the claimant company, with supporting information from the surrendering company. Claims must be made within 2 years of the end of the surrendering company's accounting period.
Consortium Relief
Consortium relief applies in joint venture structures where a company (the consortium company) is jointly owned by consortium members, with each member holding at least 5% but no single member holding more than 75%. Together the consortium members must hold at least 75% of the consortium company.
The key restriction: the amount of loss surrenderable or claimable is limited to the consortium member's proportionate holding. A member holding 30% of the consortium company can surrender or claim up to 30% of the relevant losses. This proportionate limitation makes consortium relief administration more complex than standard group relief.
Consortium relief can flow in two directions: (a) from the consortium company to a consortium member (the consortium company surrenders its losses, the member claims); (b) from a consortium member to the consortium company (the member surrenders, the consortium company claims). The direction depends on where the losses and profits arise. Consortium relief is frequently encountered in large property development joint ventures, energy projects and infrastructure consortia.
Marginal Relief and Associated Companies
The Corporation Tax marginal relief thresholds are divided by the number of associated companies. Companies are "associated" if one controls the other, or both are under common control (broadly following the CTA 2010 definition, with a 51% control threshold for the associated companies test -- note this differs from the 75% group relief test).
| Number of associated companies | Lower limit per company | Upper limit per company |
|---|---|---|
| 1 (standalone) | £50,000 | £250,000 |
| 2 | £25,000 | £125,000 |
| 3 | £16,667 | £83,333 |
| 4 | £12,500 | £62,500 |
| 5 | £10,000 | £50,000 |
| 10 | £5,000 | £25,000 |
For groups with multiple companies, nearly all companies will quickly exceed the reduced lower limit and enter the marginal relief band or the full 25% main rate. This means most mid-sized group companies pay 25% CT -- the 19% small profits rate is inaccessible except for very small groups or very profitable (above upper limit) and very small-profit (below lower limit) scenarios. Groups should model the associated companies impact when structuring new entities.
VAT Group Registration
VAT group registration allows two or more UK businesses under common control to register as a single VAT entity. Key features:
- Intra-group supplies: supplies between VAT group members are disregarded for VAT purposes -- no VAT is charged on intra-group transactions, simplifying cash flow and administration.
- Single return: the VAT group files one consolidated VAT return per period, submitted by the representative member.
- Joint and several liability: all group members are jointly and severally liable for the group's VAT debts -- HMRC can pursue any member for the full group liability.
- No minimum threshold: any two UK businesses under common control can form a VAT group, regardless of turnover. This differs from the separate VAT registration threshold (£90,000) for standalone businesses.
- Control test: one company must control the others through majority shareholding, voting rights or power to direct business affairs.
VAT groups are particularly beneficial where group companies make frequent intra-group supplies (management charges, IP licences, shared services) -- the disregarding of intra-group VAT eliminates the cash-flow mismatch of paying and reclaiming VAT on internal transactions. A disadvantage: the group's partial exemption calculation (if any member makes exempt supplies) must be done on a combined basis, potentially restricting input VAT recovery across the group.
Transfer Pricing -- OECD Arm's Length Standard
UK transfer pricing rules require that transactions between related companies (and between a company and its associated persons) are priced as if they were independent arm's-length parties. The rules follow the OECD Transfer Pricing Guidelines (OECD TP Guidelines 2022 edition).
Transfer pricing applies to:
- Goods and products: sales of tangible goods between group members -- must be at market price.
- Services: management fees, shared service charges, technical services, IT support -- must reflect the cost plus appropriate mark-up for the service.
- Intellectual property: royalties and licensing fees for trademarks, patents, software -- must reflect the economic value of the IP.
- Loans: interest on intra-group loans must be at a commercial arm's-length rate (HMRC issues transfer pricing guidance on intra-group loan rates).
UK transfer pricing rules apply to groups where at least one party is a non-UK entity. For purely domestic (UK-to-UK) intra-group transactions, SMEs (fewer than 250 employees + turnover below €50m or balance sheet below €43m) are exempt from the domestic transfer pricing rules -- but large groups are not. HMRC has increased transfer pricing compliance activity significantly, particularly for intra-group IP migration and management fee arrangements.
Contemporaneous transfer pricing documentation is recommended for any material intra-group transaction. Large companies (turnover above €750m) must file Country-by-Country Reports with HMRC, disclosing group profit allocation, tax paid and employee numbers across all jurisdictions.
Group Payment Arrangements
A Group Payment Arrangement (GPA) allows UK companies in a group to pool their Corporation Tax quarterly instalment payments into a single combined payment made by a nominated company. This reduces the administrative burden for large groups making multiple quarterly payments and allows the group to net overpayments in one company against underpayments in another without each company needing to make separate repayment claims.
GPAs are primarily used by large groups paying CT quarterly instalments (profits above £1.5 million divided by associated companies). The nominated company is responsible for calculating the combined instalment amounts and making payment to HMRC. All group members covered by the GPA must be consenting.
For smaller groups paying CT in the standard single payment (nine months and one day after period end), GPAs add little value -- each company's payment is straightforward and there is no instalment forecasting complexity. The main GPA benefit is for groups with significant combined CT liabilities and multiple companies each requiring quarterly instalment management.
Anti-Avoidance Rules
Several anti-avoidance provisions restrict artificial group arrangements:
- Group relief anti-avoidance: group relief is denied where the group structure or transaction generating the loss was created primarily for tax avoidance purposes (CTA 2010 s.154).
- VAT group anti-avoidance: HMRC can refuse or terminate VAT group registration where the purpose is primarily tax avoidance rather than commercial convenience.
- Diverted profits tax (DPT): 25% tax on profits artificially diverted from UK companies to low-tax jurisdictions through group structures.
- Controlled foreign companies (CFC): UK companies are taxed on income of controlled foreign subsidiaries held in low-tax jurisdictions, preventing artificial offshore profit parking.
- GAAR: the General Anti-Abuse Rule (Finance Act 2013) allows HMRC to counteract arrangements that are abusive in the context of the relevant statutory provisions, including group tax arrangements.
- Hybrid mismatch rules: prevent groups from exploiting mismatches between UK and foreign tax treatment of financial instruments, entities or transactions.
HMRC's Large Business directorate has specific resources dedicated to group structure compliance. Groups contemplating significant restructuring, intra-group IP transfers, or new joint venture structures should seek specialist tax counsel and consider HMRC clearance under the non-statutory business clearance process for material, genuinely uncertain transactions.
Group Tax Planning Considerations
Key planning considerations for UK groups in 2026/27:
- Loss relief optimisation: identify which group companies are profitable and which are loss-making. File group relief claims promptly -- the 2-year window from the surrendering company's period end is strict. Consider whether losses should be surrendered or carried forward depending on expected future rates and activities.
- Associated companies and CT threshold: each new company in a group reduces the CT marginal relief thresholds per member. Before incorporating a new subsidiary, model the impact on every other group company's CT rate.
- VAT group: consider forming a VAT group if intra-group supplies are significant, cash-flow impact of intra-group VAT is material, or administration simplification is valuable. Review partial exemption impact before forming the group.
- Transfer pricing documentation: maintain contemporaneous documentation for material intra-group transactions. HMRC's compliance activity includes desk reviews of intra-group charges -- documentation supports the arm's-length position and protects against penalties.
- Interest deductibility: the Corporate Interest Restriction (CIR) limits deductible interest to 30% of UK tax-EBITDA (with a £2 million de minimis per group). Highly leveraged groups should model the CIR impact on each company's deductible interest.
Worked Example: Group Relief
Group structure: ParentCo (100% owner) has two subsidiaries -- TradingCo (profitable) and StartupCo (loss-making). Accounting period ending 31 March 2027.
| Company | Taxable profit / (loss) | CT before group relief |
|---|---|---|
| TradingCo | £200,000 profit | £50,000 (25%) |
| StartupCo | (£80,000) loss | £0 |
| Group total | £120,000 net profit | £50,000 |
After group relief (StartupCo surrenders £80,000 loss to TradingCo):
- TradingCo taxable profit: £200,000 - £80,000 = £120,000
- Note: with 3 associated companies (ParentCo, TradingCo, StartupCo), TradingCo's upper limit = £250,000 / 3 = £83,333 -- £120,000 exceeds this, so 25% rate applies to all profit
- TradingCo CT: £120,000 x 25% = £30,000
- StartupCo CT: £0 (loss surrendered)
- Group CT saving: £50,000 - £30,000 = £20,000
Without group relief, the group pays £50,000 CT. With group relief, £30,000 CT -- a saving of £20,000. StartupCo's loss would otherwise be carried forward to use against future profits (if any), potentially 5 to 10 years later. Group relief gives the economic benefit now.