The UK domestic law does not allow for tax consolidation. Each UK group company is required to file tax returns on a stand-alone basis.

Group relief is available for offsetting profits and losses within UK companies in 75%-owned worldwide groups. The group relief is also extended to non-UK resident group companies that are subject to corporate tax in the UK, either by way of a permanent establishment in the UK or through trading or property businesses in the UK.

The group relief operates by offsetting the trading losses of the ‘surrendering company’ against profits realized by another group member, i.e., the ‘claimant company’. The maximum amount of group relief that can be surrendered is the lower of the available loss in the surrendering company or the available profit in the claimant company. Claims are required to be made within 2 years after the end of the accounting period, with the written consent of the surrendering company.

There is no ability to surrender capital losses to fellow group members, but gains or losses arising on a particular asset can be allocated to another group member (by means of a joint election on an asset-by-asset basis). Therefore, there is a limited ability for the capital losses of one company to be offset against the gains of a fellow group member in the same or subsequent period.

Intra-group transfers of capital assets between UK group companies are tax-neutral, including transfers to or between UK permanent establishments or non-UK resident companies that are subject to corporate tax on capital gains arising from the indirect disposals of UK immovable property (see Sec. 8.2.1.). However, under an anti-avoidance rule, a 'de-grouping' charge applies if the transferee company leaves the group within 6 years (see Sec. 11.).

Effective from 1 April 2017, losses that have not been offset under the group relief in a particular tax period, may be carried forward and surrendered as group relief in a later year, subject to certain restrictions.

Certain other restrictions and anti-avoidance rules also apply to prevent artificial arrangements with respect to claiming group relief in the UK.

The HMRC has issued detailed guidance on group relief rules, which may be accessed here.

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