Group Company Structures: The Complete Tax Guide for UK Businesses

A group company tax structure in the UK is an arrangement where one holding company owns 75% or more of one or more subsidiary companies, unlocking reliefs that let the group share losses, transfer assets, and account for VAT as if it were a single entity. For a growing business, the right structure can reduce the overall tax bill, ring-fence risk, and simplify how profits and assets move between companies. Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice, advises limited company owners on whether a group structure is worthwhile and how to put one in place correctly. This guide explains the main tax advantages: group relief, VAT grouping, Capital Gains Tax rollover within a group, and the wider benefits of a holding company.

Key Takeaways

• A UK tax group exists where a holding company owns at least 75% of a subsidiary's ordinary share capital, giving access to group relief.
• Group relief allows a loss-making company to surrender its losses to a profitable group company, reducing the group's overall Corporation Tax bill.
• VAT grouping lets connected companies register under a single VAT number, so transactions between group members fall outside the scope of VAT.
• Assets can be transferred between group companies on a no gain, no loss basis, deferring any Capital Gains Tax charge until the asset leaves the group.
• A holding company can ring-fence trading risk, hold group assets such as property, and receive dividends from subsidiaries free of Corporation Tax in most cases.
• Corporation Tax in 2026/27 is 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief between the two thresholds.

What Is a Group Company Structure and When Is It Worthwhile?

A group company tax structure is a parent-subsidiary arrangement in which a holding company owns 75% or more of the ordinary share capital of one or more subsidiary companies. At that ownership level the companies form a group for most tax purposes, which is what unlocks group relief and tax-neutral asset transfers.

A group structure becomes worthwhile when a business has more than one distinct activity, valuable assets it wants to protect, or companies whose profits and losses could usefully be pooled. A common example is a trading company that has built up cash or property: moving the property or investments into a separate company under a shared holding company protects those assets from trading risk while keeping them within the group.

Setting up a group is not free of cost or complexity, and the transfer of an existing company under a new holding company must be structured carefully to avoid triggering tax charges. The benefits should outweigh the administrative burden of running multiple companies, each with its own accounts and filing obligations.

A group magnifies the value of getting timing right across several companies at once, which is the subject of our guide to limited company year-end tax planning.

How Does Group Relief Reduce Corporation Tax?

Group relief reduces Corporation Tax by allowing a company that makes a loss to surrender that loss to a profitable company in the same group, which then sets it against its own taxable profits. This means a group does not pay tax on profits in one company while losses sit unused in another.

For 2026/27, Corporation Tax is charged at 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief tapering the rate between those thresholds. Importantly, the £50,000 and £250,000 limits are divided by the number of associated companies in a group, so each company's thresholds are lower where several companies exist. Group relief helps offset this by ensuring losses are not wasted.

Worked example. Trading Company A makes a taxable profit of £200,000, while sister Company B makes a loss of £80,000. Without group relief, Company A pays Corporation Tax on the full £200,000. With group relief, Company B surrenders its £80,000 loss to Company A, reducing Company A's taxable profit to £120,000. Because that profit sat in the marginal relief band, it was being taxed at the 26.5% effective rate, so the surrendered loss saves the group £21,200 of Corporation Tax in the year.

Group relief is only worth claiming once you know the rate each company would otherwise pay, which our guide to how corporation tax is calculated sets out in full.

How Do VAT Grouping and CGT Rollover Work Within a Group?

VAT grouping and intra-group asset transfers are two further reliefs that make a group structure tax-efficient. VAT grouping allows two or more connected companies under common control to register for VAT under a single VAT number, so supplies between group members are disregarded for VAT and only external transactions are accounted for.

VAT grouping reduces administration because the group submits one VAT return rather than several, and it can improve cash flow by removing the need to charge and reclaim VAT on internal recharges. The trade-off is that all group members become jointly and severally liable for the group's VAT.

For Capital Gains Tax, assets can be transferred between companies in the same capital gains group on a no gain, no loss basis. This means no Corporation Tax on chargeable gains arises at the point of transfer; instead the gain is deferred and only crystallises when the asset is eventually sold outside the group, or if the company holding it leaves the group within six years. This allows a group to move property and other capital assets to where they are best held without an immediate tax cost.

What Are the Advantages of a Holding Company?

A holding company is a parent company whose main purpose is to own shares in subsidiary companies rather than to trade itself, and it offers protection, flexibility, and tax efficiency for a group. Its core advantage is separating valuable assets and accumulated profits from the day-to-day risks of trading.

In most cases, dividends paid from a UK subsidiary to its holding company are exempt from Corporation Tax, so profits can be moved up to the parent and then reinvested or held without an additional tax charge. The holding company can use those funds to invest in new ventures, hold group property, or fund another subsidiary, giving the group flexibility that a single company does not have.

A holding company also supports succession and exit planning. Selling a trading subsidiary from beneath a holding company, rather than selling the whole business directly, can in some circumstances qualify for the Substantial Shareholding Exemption, which exempts qualifying gains on the disposal of a trading subsidiary from Corporation Tax. The structure must be in place and the conditions met well before any sale, so early planning is essential.

Frequently Asked Questions

What ownership percentage is needed to form a tax group in the UK?

A holding company must own at least 75% of a subsidiary's ordinary share capital to form a group for group relief and Corporation Tax purposes. The same 75% test applies to capital gains groups for no gain, no loss asset transfers. VAT grouping uses a different "control" test rather than a fixed percentage, so the eligibility rules vary by relief.

Can a group company use another group member's losses?

Yes, group relief allows a loss-making company to surrender its trading losses to a profitable company in the same 75% group, which sets them against its own taxable profits. This prevents losses from being wasted and reduces the group's overall Corporation Tax bill. The companies must be members of the group for the relevant accounting period and meet HMRC's conditions.

Is VAT charged on transactions between group companies?

No, VAT is not charged on transactions between companies in the same VAT group, because supplies between group members are disregarded for VAT. The group registers under a single VAT number and submits one VAT return covering external transactions only. All members become jointly and severally liable for the group's VAT debts as a condition of grouping.

Do holding companies pay tax on dividends from subsidiaries?

In most cases a UK holding company does not pay Corporation Tax on dividends received from its UK subsidiaries, as such dividends are usually exempt. This allows profits to move up to the parent company efficiently, where they can be reinvested or held. The exemption rules are detailed, so specific dividend flows should be checked against the current legislation.

Does setting up a group company structure trigger a tax charge?

Setting up a group structure can trigger Capital Gains Tax or Stamp Duty charges if it is not structured correctly, for example when existing shares or assets are transferred under a new holding company. Reliefs such as share-for-share exchange relief can often prevent an immediate charge, but they depend on meeting specific conditions, so professional advice should be taken before any reorganisation.

How Blue Tick Can Help

Blue Tick Accountants advises limited company owners on whether a group structure suits their business and how to implement one without triggering avoidable tax charges. From structuring a holding company and claiming group relief to setting up VAT grouping and planning a tax-efficient exit, Blue Tick Accountants models the options and handles the reorganisation correctly. Head to our website and book a meeting now.

Conclusion

A well-designed group company structure lets a UK business pool losses, move assets without an immediate tax charge, simplify VAT, and protect valuable assets under a holding company. The reliefs are valuable but conditional, and an incorrectly structured reorganisation can create the very tax charges a group is meant to avoid. If your business has multiple activities, significant assets, or an exit on the horizon, take advice early so the structure is in place and the conditions are met long before you need them.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps limited company owners across the UK structure their businesses tax-efficiently. It was last reviewed for the 2026/27 tax year.

This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change and their application will depend on your individual circumstances. You should always seek advice from a qualified professional before taking action. Blue Tick Accountants accepts no liability for decisions made on the basis of this content.