Groups
333.The basic idea of group relief is to allow an enterprise to be taxed as a single unit even if it is carried on by more than one company. So, in the simplest case, a loss made by a parent company (P) may be set off against the profits of a wholly-owned subsidiary (S). Similarly, a loss made by the subsidiary may be set off against the parent’s profits.
334.If one company is to surrender its losses to another, the two companies must be in the same group. In the case of a simple parent/subsidiary relationship, the definition in section 152 specifies that one company must be a “75% subsidiary” of the other.
335.In a less simple case, more than two companies may be involved. The group comprises all the companies that are 75% subsidiaries of a parent company, and the parent itself. For this purpose Chapter 3 of Part 24 of this Act makes clear that the necessary degree of ownership may be indirect. So, for instance, if P owns 75% of the shares in S and S owns all the shares in T, T is a 75% subsidiary of P and all three companies are members of a group.
