For a portfolio operator with three to fifteen SPVs (typical mid-size landlord scale), the eligibility question for UK corporation tax group relief is one of the highest-value gates in the entire CT framework. Where the test is met, trading losses, management expenses, excess capital allowances, non-trading loan-relationship deficits, and, the operative one for property, excess UK property business losses under CTA 2010 s.99(1)(d) can flow between group companies. Where the test is not met, each SPV operates as a stand-alone CT entity and the losses are trapped.

This page is the prior definitional layer. The mechanics of loss surrender (claim ordering, CT600 boxes, time limits) sit on our existing property company group relief corporation tax mechanics page. Here we settle the eligibility question first: when do two companies count as one group for s.131 purposes, where do the Sch 18 equity-holder overlay and the worldwide-group test expand or contract the bare 75%-share-capital arithmetic, and when does the consortium-relief route apply for property-developer JV LtdCos?

The s.131 + s.152 + s.1154 three-section composite

The headline gateway sits at CTA 2010 s.131:

"The group condition is met if the surrendering company and the claimant company (a) are members of the same group of companies (see section 152), and (b) are both UK related."

Note what s.131 actually says, and what it does NOT say. The 75% subsidiary arithmetic is not in s.131 itself; s.131 routes the same-group test to s.152, and the UK-related limb to s.134. Popular commentary sometimes collapses the test into "s.131 (the 75% subsidiary test)". The correct framing is the three-section composite:

  • s.131: gateway / group condition with two limbs (same-group plus UK-related).
  • s.152: same-group test. "For the purposes of this Part two companies are members of the same group of companies if (a) one is the 75% subsidiary of the other, or (b) both are 75% subsidiaries of a third company."
  • s.1154: 75% subsidiary arithmetic. "B is a 75% subsidiary of A if at least 75% of B's ordinary share capital is owned directly or indirectly by A."

Sitting on top of the three-section composite is the Sch 18 equity-holder overlay, which re-tests the 75% gate at the level of profits available for distribution and assets available on winding-up rather than only at the ordinary-share-capital level. All four layers must individually clear for group relief to be available.

"Ordinary share capital" is defined at s.1119 as share capital other than capital where the holders are entitled only to a dividend at a fixed rate. Fixed-coupon preference shares carrying nothing else generally sit outside ordinary share capital; participating preference shares with profit or capital participation rights typically count as ordinary share capital. The classification of hybrid instruments is one of the most frequent eligibility-trap areas.

Indirect ownership through chains of intermediate companies is computed under ss.1155 to 1157. For a three-tier structure (UltimateParent owns 100% of MiddleCo, which owns 100% of OperatingSub), each link is 100% direct and the indirect ownership is 100%. Where any link in the chain drops below 75%, the indirect ownership for the next link down is computed by multiplication (so a 100% x 80% chain produces 80% indirect ownership, still clearing 75%; a 100% x 70% chain produces 70% indirect, failing 75%).

The Sch 18 equity-holder overlay

The most counter-intuitive feature of CT group relief is that a 100%-ordinary-share-capital subsidiary can still fail the group-relief eligibility test. The Sch 18 anti-avoidance overlay is the reason.

Sch 18 paragraph 1 defines "equity holder" expansively. The equity-holder count includes:

  • Ordinary shareholders (the obvious category).
  • Holders of shares with participation rights, even if labelled "preference" shares, where the shares carry rights to a share of distributable profits or winding-up surplus beyond a fixed-coupon preference dividend.
  • Loan creditors holding loans other than normal commercial loans (the NCL test at Sch 18 paragraph 4).

Schedule 18 then re-runs the 75% test at two operative levels:

  • Paragraph 3 profits-available-for-distribution test: is the parent's share of profits available for distribution to equity holders at least 75%?
  • Paragraph 5 assets-available-on-winding-up test: is the parent's share of assets available for distribution on a winding-up at least 75%?

Both tests must clear independently of the bare s.1154 ordinary-share-capital test. Where participating preference shares, conversion rights, or non-NCL shareholder loans divert economic entitlement to non-group equity-holder positions, the parent can hold 100% of ordinary share capital while holding less than 75% of profits-available-for-distribution or assets-on-winding-up. Group relief is disqualified.

The normal commercial loan (NCL) test (Sch 18 para 4)

Sch 18 paragraph 4 is the gate that pulls non-arms-length shareholder loans into the equity-holder count. A normal commercial loan is excluded from the equity-holder count. A loan fails the NCL test (and is pulled into the equity-holder count) where it carries:

  • The right to a share of profits, rather than a fixed or floating commercial interest rate.
  • The right to convert to shares.
  • Terms inconsistent with arms-length commercial lending (excessive interest tied to participation, indefinite duration, non-standard repayment subordination beyond ordinary security architecture).

For property groups using founder-loan plus ratchet-share funding structures, the NCL test is the most common Sch 18 ambush. A founder loan structured with profit-contingent interest can fall outside the NCL definition, count as equity for Sch 18 purposes, and drag the parent's profits-available-for-distribution entitlement below 75%. Group relief disqualifies on the Sch 18 gate even though the bare s.1154 ordinary-share-capital test was 100%.

The worldwide-group s.156 overlay

Group relief in UK corporation tax flows only between UK-resident companies (with limited extensions to UK permanent establishments of overseas companies under ss.107 to 110). The worldwide-group overlay at CTA 2010 s.156 confirms the parent-subsidiary relationship across the chain even where non-UK companies sit in the middle.

For domestic property groups (UK HoldCo, UK SPVs, UK ultimate beneficial owners), the worldwide-group test rarely bites. For portfolios with overseas holding companies (commonly Jersey, Guernsey, or BVI top-cos used for non-resident UK property structuring), the worldwide-group test interacts with the s.131(1)(b) UK-related limb (defined at s.134) to control eligibility. A typical pattern: UK SPV held by Jersey ParentCo, which itself holds another UK SPV. The two UK SPVs are siblings under a non-UK parent. Group relief between the two UK siblings can still flow where the s.152 same-group test is met and the s.134 UK-related test is met for both UK companies, but the architecture demands careful analysis.

Consortium relief (ss.143 to 149)

The second route to inter-company loss flow under CTA 2010 Part 5 is consortium relief. The gateway:

  • A UK company is owned by a consortium of UK companies.
  • Each consortium member holds at least 5% of the consortium-company's ordinary share capital.
  • Collectively, the consortium members hold at least 75% of the consortium-company's ordinary share capital.
  • Each consortium member can claim a share of the consortium-company's losses limited to its proportional ownership.

For property audiences the operative gate is the trading-versus-investment line. s.143 requires the consortium-company to be a TRADING company (or a holding company of a trading group). UK property businesses are typically investment under the CTA 2009 Part 4 / Part 3 architecture. The consequences for property-JV configurations:

  • Property-investment JV LtdCo (BTL portfolio holding entity, residential rental income, no development): UK property business under CTA 2009 Part 4 = investment, not trading. Consortium relief NOT available. Losses are trapped at the consortium-company level and can only be used against its own future UK property business profits per CTA 2010 ss.62 to 66 carry-forward rules.
  • Property-developer JV LtdCo (carrying on the trade of property development, purchase plus build-out plus sale of new-build flats or commercial units): trading under the trading-versus-investment line at CTA 2010 ss.1124 to 1126 and extensive case-law. Consortium relief MAY be available, subject to all other s.143 conditions.
  • Mixed development plus retention portfolios: contested ground. Where a development company retains some completed units for long-term rental letting, the trading character can be diluted or fragmented. Stage-by-stage analysis required.

Anti-avoidance: s.137 arrangements-to-transfer-control

CTA 2010 s.137 denies group-relief eligibility for the period during which there are arrangements under which a member could leave the group. The triggering arrangements are typically option agreements over subsidiary shares, but the test is broader: any arrangement giving a third party the ability to acquire the subsidiary, or under which the subsidiary's group membership could end, can engage the section.

The case-law on what constitutes "arrangements" is fact-intensive. Heads-of-terms in sale negotiations may not be enough; a signed binding option agreement typically is. Practical effect: where a portfolio operator is in negotiations to sell an SPV (with an option signed), the SPV's losses cannot be surrendered to or from the rest of the group while the arrangements subsist. This is a frequent edge for landlord audiences using option structures for portfolio sales.

Interaction with the change-of-ownership loss-restriction regime (Part 14)

CTA 2010 Part 14 (ss.673 to 732) is a distinct regime that interacts with group relief at acquisition events. The architecture:

  • s.673: change of ownership of an investment company. Pre-acquisition losses carried forward across the change of ownership may be restricted.
  • s.674: change of ownership of a company with investment business plus a major change in the nature or conduct of the business within 3 years before or 5 years after the change of ownership. Pre-acquisition losses are sterilised entirely.
  • s.676 and s.676CA: post-FA 2017 loss-restriction overlay limiting the use of brought-forward losses against the wider group's profits after a change of ownership.

For a property group acquiring a loss-making target SPV with hopes of using the target's brought-forward losses against group profits, the Part 14 architecture is the operative restriction. Buying losses is not as simple as buying the company. RUN-session analysis: review the target's loss-history, assess whether the post-acquisition business activity will trigger the s.674 "major change in nature or conduct" test, and model the post-FA-2017 s.676 restrictions before pricing in any loss-value at acquisition.

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CT group relief vs SDLT group relief: a critical distinction

One of the most-confused areas in property-group taxation is the relationship between CT group relief (CTA 2010 Part 5, this page) and SDLT group relief (FA 2003 Sch 7, separate regime). Both use a 75% test; both are commonly described as "group relief"; both interact with intra-group property transactions. They are nonetheless distinct regimes:

  • CT group relief (CTA 2010 Part 5): surrender of losses (trading; management expenses; excess capital allowances; excess non-trading deficits on loan relationships; excess UK property business losses per s.99(1)(d); excess overseas losses) between members of a 75% group. No claw-back mechanism on intra-group asset transfers as such.
  • SDLT group relief (FA 2003 Sch 7): exemption from SDLT on intra-group transfers of land between members of a 75% group. Sch 7 paragraph 3 imposes a 3-year intra-group claw-back where the transferee leaves the group within 3 years still holding the property.

The two regimes use structurally similar but legally distinct 75% tests. The same group structure can pass one test and fail the other (most commonly: a group passes the SDLT Sch 7 paragraph 1 test on a single asset transfer but fails the CT Sch 18 equity-holder overlay; or vice versa where a participating-preference investor sits in the chain). For the SDLT regime in detail, see our companion pages on SDLT group relief for corporate landlord portfolios and the Sch 7 claw-back depth page.

Worked examples

Example 1: Three-layer 75% test (the headline arithmetic)

Patel Holdings Ltd owns 100% of Patel Property A Ltd, 100% of Patel Property B Ltd, 80% of Patel Property C Ltd, and 70% of Patel Property D Ltd.

s.152 plus s.1154 test:

  • Patel Property A: 100% > 75% → A is a 75% subsidiary of Holdings → A and Holdings are in the same group. A and B and Holdings are all 75%-related to each other.
  • Patel Property B: 100% > 75% → in the group.
  • Patel Property C: 80% > 75% → in the group.
  • Patel Property D: 70% < 75% → NOT in the group. D's losses cannot flow to or from any other group member under CTA 2010 Part 5.

Result: A, B, C, and Holdings can surrender losses to each other (subject to Sch 18 equity-holder overlay and s.137 arrangements anti-avoidance). D operates as a stand-alone CT entity. If D has any losses, they sit with D and are usable only against D's own future profits.

Example 2: Sch 18 equity-holder overlay defeats 100%-ordinary group relief

Singh Holdings Ltd owns 100% of the ordinary share capital of Singh BTL SPV Ltd. The SPV has also issued £1,000,000 of "fixed-coupon participating preference shares" to an external high-net-worth investor. The preference shares carry a fixed 5% preference dividend but also a contractual right to 90% of the surplus distributable profits and 90% of any surplus on winding-up.

s.1154 bare arithmetic: Singh Holdings owns 100% of ordinary share capital → looks like 100% subsidiary → looks like group relief available.

Sch 18 paragraph 1 plus paragraph 4 equity-holder overlay: the preference shares carry participation rights and bring the external investor into the equity-holder count. The Sch 18 paragraph 3 profits-available-for-distribution test then runs:

  • Singh Holdings is entitled to 100% of ordinary-share dividends but only 10% of surplus participating profits.
  • Singh Holdings' profits-available-for-distribution entitlement < 75%.

Group relief NOT available despite 100% ordinary-share ownership. The same trap can arise from non-NCL shareholder loans (the Sch 18 paragraph 4 NCL test) without any preference shares at all. The fix is to restructure the participating instrument as a normal commercial loan or as ordinary share capital held by the parent; both routes require careful drafting to preserve the commercial economics.

Example 3: Consortium relief for a property-developer JV (works) vs property-investment JV (fails)

Property-developer JV (works):

  • Three unconnected developer companies (BuildCo A Ltd, BuildCo B Ltd, BuildCo C Ltd) form JV Developer Ltd with ownership 40%/30%/30%. Each consortium member holds at least 5%, collectively 100%. JV Developer carries on the trade of property development (purchase plus build-out plus sale of new-build flats).
  • Year 1 trading loss £500,000.
  • s.143 result: consortium relief flows. Each consortium member can claim a share of JV Developer's losses limited to its proportional ownership: BuildCo A claims up to £200,000 (40%), BuildCo B up to £150,000 (30%), BuildCo C up to £150,000 (30%), subject to each consortium member's own profit-availability cap.

Property-investment JV (fails):

  • Same 40/30/30 ownership but JV BTL Ltd holds a 12-flat BTL portfolio for rental investment, not trading. UK property business under CTA 2009 Part 4 = investment, not trading.
  • s.143 result: consortium-company is NOT a trading company. Consortium relief unavailable.
  • The £500,000 loss is trapped in JV BTL Ltd and can only be used against JV BTL Ltd's own future UK property business profits per CTA 2010 ss.62 to 66 carry-forward rules.

The trading-versus-investment line is the operative consortium-relief gate for property audiences. Mixed development plus retention portfolios occupy contested ground.

Example 4: s.137 arrangements-to-transfer-control defeats group relief

Kapoor Holdings Ltd owns 100% of Kapoor BTL SPV Ltd. Kapoor Holdings is in negotiations to sell the SPV to a third-party buyer; an option agreement has been signed under which the buyer can call for the SPV's shares at any time in the next 18 months. Kapoor BTL SPV's UK property business has an £80,000 loss in the current accounting period.

s.137 result: the option agreement is an arrangement under which a member could leave the group. Group relief is denied for the period during which the arrangements subsist. The SPV's losses cannot be surrendered up to Kapoor Holdings or sideways to a sister SPV. The £80,000 carries forward in the SPV itself and is only usable post-disposal if the buyer's group qualifies (and subject to the Part 14 change-of-ownership restrictions on the buyer's side).

The discipline: assess group-relief eligibility before signing option arrangements, and consider whether the in-period loss can be surrendered before the arrangement is signed.

Example 5: Buying a loss-making target and the s.673 sterilisation

Verma Holdings Ltd acquires 100% of Verma Acquired SPV Ltd from an unrelated seller. The target SPV has £600,000 of brought-forward UK property business losses from pre-acquisition accounting periods. Verma Holdings plans to use those losses against the wider group's CT profits.

CTA 2010 s.673 plus s.674 plus s.676 result:

  • Change of ownership of an investment company → losses carried forward across the change of ownership are restricted.
  • If there is also a major change in nature or conduct of the business within 3 years before or 5 years after the change of ownership (s.674 trigger), the losses are sterilised entirely.
  • Even absent the s.674 trigger, s.676 plus s.676CA limit the use of pre-acquisition losses against the wider group's profits under the post-FA-2017 loss-restriction architecture.

Result: the £600,000 of pre-acquisition losses are unlikely to flow up to Verma Holdings. Buying a loss-making target does not give the acquirer's group access to those losses without careful Part 14 analysis at the acquisition diligence stage.

Example 6: CT vs SDLT group relief on the same group structure

Kapoor Property Group: HoldCo owns 100% of SPV-A plus 100% of SPV-B. The group transfers a £750,000 commercial unit from SPV-A to SPV-B as an intra-group property transfer.

  • CT group relief context (CTA 2010 Part 5): not directly engaged on a single asset transfer. Part 5 governs loss surrender between group companies. TCGA 1992 s.171 governs the intra-group CGT roll-over on the asset transfer itself (a sibling-but-distinct intra-group regime). If SPV-A or SPV-B has losses, those losses can flow to the other under Part 5, separately from the asset transfer.
  • SDLT group relief (FA 2003 Sch 7): DIRECTLY engaged on the asset transfer. Sch 7 paragraph 1 applies the same 75%-subsidiary test (structurally similar to CTA 2010 s.152 / s.1154 but legally distinct provisions). Sch 7 paragraph 3 imposes a 3-year intra-group claw-back: if SPV-B leaves the group within 3 years while still holding the £750,000 unit, SDLT becomes payable retrospectively on the transfer at the time of leaving.

The same group structure passes both eligibility tests on this fact pattern, but the operative regimes are distinct: CT group relief governs loss flows, SDLT group relief governs SDLT exemption on the asset transfer. Stage by stage, the two regimes must be analysed separately.

Practical eligibility-check discipline

For any multi-company property structure considering CT group relief, the workflow:

  1. Map the ordinary-share-capital ownership chain. Identify every link and the percentage at each link. Compute indirect ownership through multiplication for chains.
  2. Run the s.152 same-group test on each pairing that could share losses. At least 75% direct or indirect ownership at every link.
  3. Run the s.134 UK-related test on each company in the proposed group flow. UK residence or qualifying UK permanent establishment.
  4. Apply the Sch 18 equity-holder overlay. Identify all preference share classes, conversion rights, and shareholder loans. Test each instrument against the Sch 18 paragraph 1 equity-holder definition and the paragraph 4 NCL test. Re-run the 75% test at the profits-available-for-distribution and assets-on-winding-up levels.
  5. Check s.137 arrangements. Any option agreements, sale heads-of-terms, or other arrangements that could end a member's group membership during the relevant period.
  6. Check the worldwide-group s.156 overlay if any non-UK companies sit in the chain.
  7. For acquisitions: Part 14 change-of-ownership review. Document the pre-acquisition loss position, the post-acquisition business activity, and any s.673 / s.674 / s.676 restrictions.
  8. For JV consortium configurations: confirm the consortium-company is trading (not investment) for s.143 purposes; confirm each consortium member's 5%-plus and collective 75%-plus thresholds.
  9. Apply the CT-vs-SDLT regime distinction separately to any intra-group asset transfers.

Where the structure is clean, group relief is one of the most valuable features of multi-company operation. Where any gate fails, the loss-flow architecture has to be redesigned, and the existing pages on extraction and SDLT group-relief mechanics become the next-step references.

Where this page sits in the cluster

This page is the eligibility / definitional layer. The companion pages cover the layers beneath: