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HMRC internal manual

Company Taxation Manual

Groups: group relief: examples of arrangements


Even though two companies otherwise satisfy the conditions for group relief at any time, the conditions are deemed not to be satisfied if certain ‘arrangements’ are in existence at that time(CTA/S154 (CTM80165)).


This is an example of the type of arrangements to which CTA/S154 applies.

A loss-making company attaches one of its subsidiaries to a profitable group:

  • for long enough for that second group to benefit from the subsidiary’s capital allowances on a major investment project,


  • with a prior arrangement or undertaking that the subsidiary will then revert to the original (and real) parent.

CTA10/S154 applies in every case where arrangements exist.  There is no requirement for a purpose of the arrangements to include a tax advantage.

An arrangement would also include the uncomplicated case where there is a simple sale of a subsidiary (whether or not any avoidance motive is present), which results in the subsidiary:

  • leaving one group, and
  • joining another or coming under different control

Arrangements may be a matter of specific agreement or inherent in the capital structure of a company.  Examples of inherent arrangements are where:

  • the majority of the voting rights in a company is held other than by the purported parent, or
  • where such majority control, though not at present so held, can be acquired through the exercise of conversion rights attaching to the company’s loan or debenture stock.

See the judgement of Lord Bridge of Harwich in Pilkington Bros Ltd v CIR 55TC705 for the wide meaning given to the term ‘arrangements’ in this context.