HMRC internal manual

Company Taxation Manual

CTM81555 - Groups: group relief: surrendering company not UK resident: amount of the loss: unallowable losses and arrangements


The extended loss relief rules identify a specific category of loss for which UK group relief will now be available. There are certain conditions, which need to be met before the loss can be available for surrender as group relief, (see CTM81525).

In addition there are rules to prevent group relief being given, which otherwise, as a result of certain arrangements, would be available for surrender.

How the rules work

The unallowable loss rules apply to losses which arise to companies or permanent establishments in European Economic Area (EEA) territories, and which are therefore potentially available for relief under Chapter 3 Part 5 CTA 2010. 

There are two conditions and relief will be denied only if both are met.

  • The first condition is that arrangements either:
    • turn an existing loss into a loss which will qualify for relief; or
    • give rise to a new loss that qualifies for relief.
  • The second condition is that obtaining that relief was one of the main purposes of those arrangements.

Definition of arrangements

‘Arrangements’, for this purpose, includes any agreement, understanding, scheme, transaction or series of transactions, whether legally enforceable or not. The legislation does not apply simply because UK group relief will be available as a result of actions taken by any party to those arrangements. It acts so that UK group relief will only be denied where obtaining that relief was one of the main purposes of the arrangements.

Where such a main purpose exists relief is denied for the entire amount of the loss – there is no just and reasonable apportionment.

Main purpose

Whether or not a main purpose of arrangements was to obtain the relief is a subjective question to be determined by a consideration of all relevant facts and circumstances.  This is likely to require an investigative approach in looking at the purpose(s) of the arrangements that were implemented – what was the purpose(s) of those involved in determining what arrangements to put in place, including the decision makers and any ‘architect’ of the arrangements making recommendations to the ultimate decision makers? 

Purpose refers to the object of the arrangements, the consequences that were intended to flow from the arrangements.   A purpose that is ancillary or of little importance compared to another purpose (or purposes) is not a ‘main’ purpose; however, an arrangement can have more than one main purpose and even if the primary purpose is commercial this does not mean there cannot also be a main purpose to obtain relief under Chapter 3 Part 5 CTA 2010.