Abolition of cross-border group relief

The measure

Existing provisions within the corporation tax group relief rules extend the normal scope of group relief to allow, in certain limited specific circumstances, a company resident in the European Economic Area (EEA) to surrender its tax losses to a UK group company. Legislation will be introduced in the Finance Bill to repeal these provisions. 

Separate existing provisions, which increase the ability for the group relief surrender of tax losses by UK permanent establishments of EEA-resident companies, will also be repealed. This will bring the required conditions in line with those applicable to loss-making UK permanent establishments of companies resident elsewhere in the world. 


Who will be affected?

Multinational businesses with profit-making UK companies and: 

  • loss-making EEA group companies with ‘definitive losses’ which fulfil the current requirements for cross-border loss relief; and/or
  • EEA-resident group companies with loss-making UK permanent establishments.


When will the measure come into effect?

The changes will apply for corporation tax accounting periods ending after 27 October 2021. Where a company’s accounting period straddles this date, it will be deemed to have separate accounting periods.

Our view

The cross-border group relief provisions were originally introduced to reflect judgments of the CJEU and therefore to bring the UK’s group relief provisions in line with EU law and freedoms. Following the end of the Brexit implementation period, it is not surprising that the Government has chosen to amend the law in this area to broadly restore the previous rules and make the treatment of EEA group companies consistent with all other non-UK group companies.