Read the original guidance here:
HMRC SDLT: Guide to Group Relief and Partnerships with Examples and Applications

Understanding Group Relief and Its Application

Group Relief is a helpful provision in the UK tax system that allows companies within the same group to transfer certain tax benefits. This guidance breaks down what Group Relief is, who can use it, and how it works, including examples to clarify the concepts.

What is Group Relief?

Group Relief is a mechanism that allows one company in a group to offset its losses against the profits of another company in the same group for tax purposes. This means that if one company is struggling financially while another is doing well, they can share their financial results to reduce the overall tax burden.

• Companies must be part of the same group—this typically means they are under common control.
• This relief can also apply to losses made in previous years that can be carried forward.
• Group Relief is available under certain conditions, set out in the law.

Who Can Benefit from Group Relief?

The companies that can benefit from Group Relief include:

• English Partnerships (EP) and English Limited Partnerships (ELP)
• Scottish Partnerships (SP) and Scottish Limited Partnerships (Sc LP)
• Limited Liability Partnerships (LLP)

If a company qualifies as any of these, it may be able to claim Group Relief provided it meets specific conditions outlined by HMRC.

Conditions for Group Relief

To qualify for Group Relief, the following must be true:

• The companies must be part of a group for at least 12 months.
• The company making the claim must have suffered a loss.
• The company receiving the relief must have profits that can be offset.

How to Apply Group Relief

Companies need to follow a formal procedure to apply for Group Relief, which includes:

• Filling out the appropriate forms.
• Making sure that all companies in the group agree to the claim.
• Providing any additional documentation needed to support the claim.

Now let’s look at some examples to illustrate how Group Relief operates in different types of partnerships.

Examples of Group Relief in Different Partnerships

English Partnerships and Limited Partnerships

• Example 1: English Partnerships

Consider two companies, Company A and Company B, operating as an English Partnership. Company A has a loss of £50,000, while Company B has a profit of £100,000 for the same tax year. Company A can transfer its loss to Company B, reducing Company B’s taxable profit to £50,000. Thus, they collectively reduce their tax liability, benefiting the entire group.

• Example 2: English Limited Partnerships

In this scenario, Company C and Company D are in an English Limited Partnership. Company C has a loss of £20,000, and Company D makes a profit of £60,000. By transferring the loss from Company C to Company D, they reduce D’s taxable profit down to £40,000. Again, this demonstrates how Group Relief can significantly lessen tax responsibilities.

Scottish Partnerships and Limited Partnerships

• Example 1: Scottish Partnerships

Imagine Company E and Company F are engaged as a Scottish Partnership. Company E posts a loss of £30,000, while Company F reports a profit of £80,000. Company E can transfer its loss to Company F, thus decreasing F’s taxable profit to £50,000.

• Example 2: Scottish Limited Partnerships

In another instance, Company G, operating as a Scottish Limited Partnership, incurs a loss of £10,000 while Company H earns £45,000 in profit. Company G can transfer its loss to Company H, effectively lowering H’s taxable profit to £35,000. This example shows how losses can be utilized efficiently within groups.

Limited Liability Partnerships (LLPs)

• Example 1: LLP

Consider Companies I and J, which have formed a Limited Liability Partnership. If Company I has a loss of £15,000, while Company J earns £50,000, Company I can transfer the loss to Company J. This adjustment would decrease J’s taxable profit to £35,000, demonstrating the advantages of Group Relief.

• Example 2: LLP – Another Scenario

In a different case, Companies K and L are part of another LLP. If Company K has a loss of £5,000, and Company L reports a profit of £25,000, the loss can be transferred to L. Consequently, L’s taxable profit would be reduced to £20,000.

Advanced Considerations for Group Relief

While the basics of Group Relief are essential, there are additional points to keep in mind:

• In some situations, losses must be shared according to specific proportions. This is important for maintaining fairness and compliance.
• If there are any changes in the group structure—such as a company leaving or joining—a new assessment of eligibility for Group Relief may be necessary.
• All companies involved need to confirm their agreement to the Group Relief claim, making sure there is no dispute about the figures involved.

Understanding the Sum of the Lower Proportions

Another aspect to consider is the concept of the Sum of the Lower Proportions (SLP). This applies when multiple companies are sharing losses. To find the allowable relief:

• Calculate the loss for each company.
• Apply each company’s proportion of the Group Relief to ensure no one company claims more than their share.
• This method ensures that all companies can benefit fairly from the relief available.

Reference Codes for Further Guidance

For specific provisions and more detailed information about Group Relief, the following reference codes may help:

• SDLTM34350 – Application of exemptions and reliefs: Group Relief
• SDLTM34360 – Application of Group Relief
• SDLTM34365 – Application of para 27A – Example
• SDLTM34370 – English Partnerships (EP) and English Limited Partnerships (ELP)
• SDLTM34380 – Example 1 ELP and EP
• SDLTM34390 – Example 2 ELP and EP
• SDLTM34400 – Example 3 ELP and EP
• SDLTM34410 – Scottish Partnerships (SP) and Scottish Limited Partnerships (Sc LP)
• HMRC SDLT: Guide to Group Relief and Partnerships with Examples and Applications