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HMRC internal manual

Company Taxation Manual

Groups: group Relief: the group relationship

CTA10/S131(1)(a), CTA10/Part 5/Chapter 5, CTA10/Part 24/Chapter 3,

For companies to be members of the same group under CTA10/S152:

  • one company must be a 75% subsidiary of the other, or
  • both must be 75% subsidiaries of a third company.

See also the consortium relief conditions in CTM80530.

The definition of ‘75% subsidiary’ is in CTA10/S1154(3), and requires one company to have direct or indirect beneficial ownership of at least 75% of the ordinary share capital in another.

Beneficial ownership can be affected in cases where a group company enters liquidation (CTM80209).

In addition to the rules in Part 24 there are extending qualifying tests for group relief purposes:

  • tests that include not only the appropriate percentage of the ordinary share capital, but also the beneficial entitlement to profits and assets (in CTA10/S151(4)) – see CTM80155 onwards, and
  • tests that ensure that two companies are not treated as belonging to the same group if there are arrangements by which, broadly:


  • one of the two companies could transfer to another group, or
  • the two companies are, or could be, under different control, or
  • assets comprised in a trade could be transferred out of the group by one of the two companies without attracting a balancing adjustment.

The ‘arrangements’ legislation is in CTA10/Ss154-156, and there is detailed guidance at CTM80165 onwards.

CTA10/Part 24/Chapter 3 looks at both direct and indirect ownership of ordinary share capital.  Indirect ownership is where one company is treated as owning the share capital held by its subsidiaries (and so on down the chain).

The proportion of indirect ownership is calculated (under CTA10/S1156) by multiplying the ownership fractions through the ownership chain.  In order to calculate a company’s percentage holding in a particular subsidiary:

  • Multiply the percentage holding the company has in its direct subsidiary by the holding that subsidiary has in its subsidiary, and so on down to the subsidiary in question, and
  • If a company has both a direct and indirect (or more than one indirect) holding in the same subsidiary, then in order to determine that company’s total holding in the subsidiary, all percentages should be added together.

An example of this can be found here.