Run a portfolio through several SPVs and it is only a matter of time before one of them makes a loss while another turns a profit — a scheme that overran on finance costs sitting alongside a completed development that sold well. Left alone, the loss-making company simply carries its loss forward against its own future profits, while the profitable one pays full corporation tax on everything it made. Group relief exists to stop that happening by design rather than by accident, but it is not automatic, and the group has to actually meet the test before a surrender can be claimed.
Why a loss in one company doesn't help another on its own
Each company in a group is its own separate taxpayer. A loss made by one SPV reduces that company's own taxable profit, and if there is nothing to set it against in the same period, it carries forward to be used against that same company's future profits — it does not automatically flow across to a sister company just because they share a director or a parent. Group relief is the mechanism that allows a company with a qualifying loss to surrender some or all of it to another company in the same group, which then claims the surrendered amount against its own profits for the corresponding period. Both a claim and a surrender have to be made; nothing happens by default.
The 75% test, and the three thresholds hiding inside it
Two companies form a group relief group where one is a 75% subsidiary of the other, or both are 75% subsidiaries of the same parent. What catches people out is that "75%" is not one number but three separate tests, all of which need to be met: beneficial ownership of at least 75% of the ordinary share capital, entitlement to at least 75% of profits available for distribution to equity holders, and entitlement to at least 75% of assets on a winding-up. A joint venture partner or a minority investor holding more than 25% under any single one of those three measures — even if the other two look comfortably above 75% — is enough to take the companies outside the group relief rules. This is a deliberately wider test than simple majority share ownership, designed to catch structures where economic rights have been engineered around a headline shareholding.
What can actually be surrendered
Group relief is not limited to conventional trading losses. The categories that can be surrendered include trading losses, UK property business losses, non-trading loan relationship deficits (relevant where development finance interest sits in a company that isn't itself trading), and excess management expenses in an investment company. A pure property investment SPV, holding lettings rather than running a trade, does not need to qualify as a trading company to surrender a property business loss — what matters is the group test, not the nature of the company's activity. This matters for property groups specifically, because a finance or holding company carrying interest costs that would otherwise be restricted under the rules covered in our guide to Corporate Interest Restriction can, in the right structure, surrender a resulting deficit to a profitable operating company instead of it simply sitting unused.
Consortium relief for joint venture structures
Where a company is owned by a consortium — several unconnected investors each holding at least 5%, together owning at least 75% — ordinary group relief does not apply because no single member holds 75% on its own, but a related regime called consortium relief allows losses to flow between the consortium company and its members, broadly in proportion to each member's stake. This is the relevant relief for many genuine property joint ventures structured through a jointly owned company rather than a wholly owned subsidiary, and it is easy to assume group relief is simply unavailable in a JV without checking whether the consortium rules apply instead.
The £5 million deductions allowance on carried-forward losses
Since April 2017, losses carried forward from an earlier period can also be surrendered as group relief for carried-forward losses, not just current-year losses — but with a restriction. A group shares a single £5 million deductions allowance across all its companies; carried-forward losses within that allowance can offset profits in full, but above it, carried-forward losses (whether used by the same company or group relieved) can only shelter up to 50% of remaining profits. A group with several SPVs carrying forward losses from earlier, leaner years needs to allocate that shared £5 million allowance deliberately across the group rather than assuming each company gets its own.
Where property SPV groups get this wrong
- Assuming common directorship or a shared registered address creates a group — only the 75% ownership and economic entitlement tests matter, not who runs the companies day to day.
- Missing the effect of a JV partner's stake on the 75% profits and assets tests, even where share capital ownership alone looks like it clears 75%.
- Treating a loss-making SPV as a write-off rather than checking whether its loss can be surrendered to a profitable sister company in the same period.
- Ignoring corresponding accounting periods — where group companies don't share the same year end, only the overlapping part of each period is available for surrender, and the calculation needs to be apportioned accordingly.
- Conflating this relief with SDLT group relief, covered separately below, on the assumption that meeting one test automatically satisfies the other.
Not the same relief as SDLT group relief
It is easy to hear "group relief" in a property context and think of the SDLT relief that exempts a transfer of property between group companies from Stamp Duty Land Tax, which we cover in detail in our guide to SDLT group relief. The two reliefs share a name and both broadly require 75% group membership, but they sit in entirely different legislation, use their own definitions of what counts as a group, and serve completely different purposes — one shelters a loss against corporation tax, the other exempts a land transaction from SDLT and carries its own three-year clawback if the companies leave the group afterwards. A structure that qualifies for one does not automatically qualify for the other, and each needs to be checked on its own terms.
For a group running several SPVs, the practical starting point is simply mapping the group properly: confirming which companies genuinely meet all three 75% thresholds, identifying where a JV partner's stake might break that test, and checking each year whether a loss in one company could usefully be surrendered to a profitable one before it is left to carry forward unused. Our Property Advisory service covers group and SPV structuring alongside the wider tax position of a development or investment portfolio.
Common questions
What is corporation tax group relief?
Group relief lets one UK company surrender certain losses, such as trading losses, UK property business losses, non-trading loan relationship deficits and excess management expenses, to another company in the same group, which then sets the surrendered amount against its own taxable total profits for the corresponding period. It only reduces the group's overall tax bill if a company actively claims the surrender; a loss sitting unused in a loss-making company does nothing for a profitable sister company on its own.
What is the 75% test for group relief?
Two companies are in a group relief group if one is a 75% subsidiary of the other, or both are 75% subsidiaries of a common parent. The test looks at three separate 75% thresholds, not just share ownership: beneficial ownership of ordinary share capital, entitlement to at least 75% of profits available for distribution to equity holders, and entitlement to at least 75% of assets on a winding-up. A minority shareholder or joint venture partner holding more than 25% under any one of these three tests can break group relief eligibility even where the other two thresholds are met.
Can a property investment company's losses be group relieved?
Yes. UK property business losses, along with non-trading loan relationship deficits, are within the categories of loss that can be group relieved, alongside ordinary trading losses. A property investment SPV does not need to be a trading company to surrender a property business loss to a profitable group member; what matters is that both companies are in the same 75% group for the accounting period in question.
Is corporation tax group relief the same as SDLT group relief?
No, they are entirely separate reliefs under different legislation with different tests. Corporation tax group relief lets one company surrender a loss to another to reduce a corporation tax bill. SDLT group relief exempts a transfer of property between group companies from Stamp Duty Land Tax altogether, uses its own group definition and clawback rules if the companies leave the group within three years, and has nothing to do with losses. A group can qualify for one without automatically qualifying for the other.
Kieran Holsgrove is a Director and Co-Founder of Grafene Accounting, the property tax specialist firm based in Liverpool. He advises property developers, investors and landlords across Merseyside, Greater Manchester, Lancashire and Cheshire on tax structuring, developer VAT, SDLT and the long-view decisions that compound over the life of a portfolio.
This article is general information, not personal tax advice, and tax rules change. Your own position depends on facts we cannot see from here — please take advice before acting on anything above.