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Consortium relief – amendment to rules

Proposed changes have been made to the consortium relief rules, which should enable certain UK group companies, who are members of a group with a foreign-owned consortium, to access the losses of UK resident consortium companies.

Targeted anti-avoidance rules also aim to restrict the availability of member companies’ losses in situations where share ownership does not reflect the company’s actual level of involvement in the consortium.

Baker Tilly analysis


The extension of the consortium relief rules to enable companies resident in countries within the European Economic Area to be the ‘linked’ company in a consortium is a welcome change.

The introduction of a further test to determine the proportion of a consortium’s losses to be allocated to a member seeks to target artificial arrangements

In detail


The Government intend to amend the rules regarding two areas of consortium tax relief.

Previously, a UK group company would be denied relief for losses incurred by a consortium company unless the group company engaged in the consortia (‘the link company’) is a UK resident company. The rules are to be extended to allow European Economic Area resident companies engaged in consortia to become the link company for the purposes of consortia relief. This will allow UK companies in the same group as the foreign consortia member to access for the first time the UK losses of the consortium company. This follows judicial comment to the effect that the UK rules were too restrictive.

The rules will also tighten to ensure the access to loss relief is only given in proportion to the member company’s active involvement in the consortium. Currently, the proportion of losses that a member company has allocated to the consortium is limited to the lowest of three percentages (percentage of ordinary share capital held, percentage of the member’s entitlement to profits available for distribution, or the percentage entitlement to assets available for distribution on a winding-up of the consortium company).

A fourth test is to be introduced, which is a broad measure of the level of effective control/active involvement the member has in the consortium.  This aims to stop artificial arrangements whereby different classes of shares are given to members to enable them to claim a proportion of losses higher than their entitlement would otherwise allow were it based on actual involvement.