ACCA ATX-UK: Group Relief vs Consortium Relief Explained

Two loss reliefs in the ACCA ATX-UK corporate tax syllabus look similar on the surface, sit in the same part of the legislation, and get tested in almost every sitting that includes a group tax question. Group relief and consortium relief both let one company's trading loss reduce another company's taxable profit. That is where the similarity ends, and it is exactly where candidates lose easy marks. They apply the group relief ownership test to a consortium scenario, forget the restriction formula that consortium relief requires, or claim full relief for a loss that should have been capped at a shareholding percentage. None of this is conceptually hard once the two reliefs are kept separate in your head. The problem is exam pressure blurs them together.

Why examiners keep testing this pairing

ATX-UK questions rarely test group relief and consortium relief in isolation. A typical scenario gives you a parent company, a couple of wholly owned or near-wholly-owned subsidiaries, and then a jointly owned company held by three or four unconnected shareholders. The marking team is checking whether you can correctly identify which relationship exists before you touch a single number. Get the relationship wrong and every subsequent calculation is wrong too, even if your arithmetic is flawless. This is why exam technique here starts with a structured ownership test, not with the loss figures.

Group relief: the 75% test

Group relief allows a UK resident company (or one within the charge to UK corporation tax) to surrender a current-year trading loss, or certain other current-year amounts, to another company in the same group, which then uses it against its own taxable total profits. The relationship that has to exist is a 75% group: one company must be a 75% subsidiary of the other, or both companies must be 75% subsidiaries of a third company. For group relief specifically, HMRC also requires the parent to be entitled to at least 75% of the subsidiary's distributable profits and at least 75% of its assets on a winding up, not just 75% of the ordinary share capital. That extra layer catches candidates who check share capital alone and assume the group relationship automatically holds.

Key points to lock in for group relief questions:

• The claim is between two companies in the same 75% group, and there is no restriction based on percentage ownership once the 75% threshold is met.
• A company can surrender losses to more than one group company, and can receive relief from more than one group company, subject to the usual current-year and time-apportionment rules.
• The surrendering company and the claimant company must both be within the charge to UK corporation tax for the overlapping period.

Consortium relief: a different relationship, a different test

Consortium relief applies where a company is owned by a consortium rather than sitting inside a straightforward parent-subsidiary group. A company is owned by a consortium when at least 75% of its ordinary share capital is held between several companies, each of which holds at least 5%, and none of which individually holds enough to make it a 75% subsidiary of that single company. Each of those shareholder companies is a consortium member, and each can claim (or surrender) consortium relief with the consortium-owned company.

The critical difference from group relief is that consortium relief is always restricted by the consortium member's percentage shareholding. You cannot simply pass the whole loss across, even if the consortium member has ample taxable profit to absorb it. Where relief has to flow through a fellow group company of the consortium member rather than the member itself (a link company arrangement), the restriction uses the lowest of the relevant percentages in that chain, not whichever percentage looks more favourable. This “lowest of” principle is the single most commonly missed point in ATX-UK answers on this topic.

Worked mini-example: the restriction in action

Consortium company C Ltd makes a trading loss of £500,000 for the year. Its ordinary share capital is held by four unconnected companies: M Ltd owns 40%, and three other companies hold the remaining 60% between them, none individually reaching 75%. C Ltd is therefore owned by a consortium, and M Ltd is a consortium member.

M Ltd has taxable total profits of £300,000 for the corresponding period and wants to claim consortium relief. The maximum relief available to M Ltd is not the full £500,000 loss. It is restricted to the lower of two figures: M Ltd's percentage shareholding applied to C Ltd's loss (40% x £500,000 = £200,000), and M Ltd's own taxable total profits for the period (£300,000). The lower figure, £200,000, is the maximum M Ltd can claim. The remaining £300,000 of C Ltd's loss is available to the other consortium members, again each restricted to their own percentage shareholding and their own available profits.

If M Ltd's shares in C Ltd were instead held by a fellow group company acting as the link company, the same 40% restriction would apply through that link company rather than through M Ltd directly, and if the link company's own stake in C Ltd differed from M Ltd's economic interest, the lowest percentage in the chain would govern the claim. That chained restriction is what regularly trips up candidates who have correctly learned the basic 40% rule but have not practised the group-consortium combination scenario.

The exam-technique trap, and how to avoid it

The mistake examiners report most often is not a failure to know either relief exists. It is applying the wrong relief's mechanics to the scenario given. Candidates see two or more companies with a shared trading loss problem, default to the group relief method they practised more often, and forget to check whether the ownership structure is actually a consortium. The reverse also happens: candidates spot a jointly owned company, correctly identify consortium relief, then forget to apply the percentage restriction and calculate as if it were a straightforward group relief claim with no cap.

A reliable sequence for any ATX-UK question involving more than one company and a loss:

• Map the ownership structure first, using percentages given in the question, before writing any loss calculation.
• Ask whether any company is a 75% subsidiary of another. If yes, you are in group relief territory and there is no percentage restriction on the amount surrendered.
• Ask whether a company is owned by several unconnected shareholders each holding at least 5% and collectively at least 75%. If yes, you are in consortium relief territory, and every claim must be restricted to the lower of the shareholding percentage applied to the loss, and the claimant's own available profits.
• Check for a link company arrangement whenever a consortium member's own group is involved, and apply the lowest relevant percentage in the chain.

This is also a subject where the professional marks and clear workings matter, in the same way that the ethics marks candidates skip matter elsewhere on the paper: showing the examiner your ownership analysis before the number-crunching earns method marks even if a later figure is wrong.

Keep the two reliefs separate in revision

Group relief and consortium relief will keep appearing together on ACCA Advanced Taxation papers because they test the same underlying skill: reading an ownership structure accurately before you calculate anything. Build a short comparison table into your own notes, practise identifying the relationship from percentages alone before you look at the loss figures, and always ask whether a restriction applies before you write down a relief figure. That single habit removes one of the more avoidable ways to lose marks on an otherwise strong ATX-UK script.