What UK Corporation Tax changes should group companies consider in the 2024/25 financial year?

Introduction: why 2024/25 matters for groups

For UK group companies, corporation tax is rarely a single-company exercise. Group relief, intra-group funding, transfer pricing, interest restrictions, cross-border movements, and the practical reality of consolidated reporting mean that even “small” tax changes can create ripple effects across the whole structure. The 2024/25 financial year is a particularly important period to review, stress-test, and (where appropriate) recalibrate group tax positions because several measures that have recently bedded in will be influencing computations and cash tax profiles in real time, and because the compliance expectations around multinational and larger domestic groups continue to rise.

This article focuses on the practical UK corporation tax changes and themes that group companies should consider in the 2024/25 financial year. It is written for finance leaders, tax teams, and advisers who need a structured way to think about the impact on planning, reporting, and risk. It does not attempt to replace professional advice or cover every scenario, but it does aim to be comprehensive enough to support a meaningful internal review and a robust conversation with your tax specialists.

1) Corporation tax rates, marginal relief, and the group impact

The move to a main rate of 25% alongside a small profits rate and marginal relief has changed the “shape” of UK corporate tax. For groups, the headline rate is often not the main story; the more subtle point is that the small profits thresholds and associated calculations can become complex when you have multiple companies, associated companies, fluctuating profits, or profit allocation decisions.

In practical terms, groups should revisit how “associated companies” are identified and counted in the rate calculation. The associated company rules can change the effective thresholds available to each company, and groups with multiple UK subsidiaries may find that entities that once benefited from lower effective rates no longer do so. This can affect both forecast tax expense and current tax payments.

Key actions for 2024/25 include: (i) ensuring that the associated company count is correctly determined for the year (including any dormant companies that might still be relevant), (ii) checking whether any corporate restructurings or changes in control alter that count, (iii) reviewing whether profit allocation or timing decisions (such as dividend policies, management charge structures, or intragroup service arrangements) inadvertently push companies into different marginal relief bands, and (iv) reassessing quarterly instalment payment status where groups may have moved between regimes due to higher expected liabilities.

2) Full expensing, capital allowances, and group investment strategy

The introduction of full expensing for qualifying plant and machinery for companies has made capital allowances planning much more commercially aligned for many capital-intensive groups. However, groups need to consider the boundaries: not all expenditure qualifies, not all assets are eligible, and the interaction with group structures can shape the true value.

In 2024/25, group tax teams should review capital expenditure pipelines and validate: (a) which entities are incurring the spend, (b) whether those entities have sufficient taxable profits to benefit immediately, and (c) whether the group’s accounting policies and fixed asset registers capture the required detail for robust claims. Groups should also consider how leasing arrangements, sale-and-leaseback transactions, and intragroup asset transfers might affect eligibility or timing.

A frequent group issue is where one company invests heavily but has limited taxable profits, while another company has high taxable profits but low capex. While group relief can help match losses to profits in some scenarios, capital allowances do not always translate neatly into group relief outcomes because the relief is claimed in the investing company’s tax computation. Therefore, groups may wish to examine whether asset ownership and operational structures still make sense in light of full expensing, while balancing commercial, legal, and financing considerations.

Do not overlook the Annual Investment Allowance (AIA) either. While it is a long-standing relief, the practical challenge in groups can be the allocation and tracking of AIA where multiple companies incur qualifying spend. Ensure there is a clear internal policy on AIA allocation, supported by evidence and aligned to forecasting, so that claims are consistent and defensible.

3) R&D relief reform: merged scheme effects and “intensity” considerations for groups

R&D tax relief has been through substantial reform, including the move toward a more unified approach for many companies and changes to how some categories of cost are treated. For groups, the biggest issues are (i) how claims are prepared across multiple entities, (ii) how subcontracting and externally provided worker arrangements are structured, and (iii) how the reforms interact with loss positions, tax credit expectations, and cash flow.

In 2024/25, groups should ensure they have updated claim methodologies reflecting the current rules. That includes reviewing whether the group uses shared R&D resources and, if so, whether the contracting and recharge arrangements are aligned with the relief framework. Even where commercial arrangements are unchanged, the tax outcomes may differ because the relief rules can be sensitive to who “contracts for” the R&D and where decision-making sits.

Another group theme is documentation and governance. Larger groups often have multiple R&D projects at different stages and across different businesses. A centralised R&D tax governance framework (project identification, cost capture, narrative preparation, review, and sign-off) reduces risk and improves the quality of the claim. It also helps manage HMRC engagement and the likelihood of enquiries.

Finally, consider how the reform landscape affects forecasts. If your group has historically treated R&D relief as a predictable cash inflow, you may need to revisit your expected benefit level, the timing of receipt, and the probability-weighted outcomes given increased scrutiny and evolving administrative requirements.

4) The corporate interest restriction and intragroup financing

The corporate interest restriction (CIR) continues to be a core area for group companies, especially those with external debt, acquisition financing, or complex internal funding structures. Even if the CIR rules have not “changed overnight” in a way that feels dramatic, groups should treat 2024/25 as a year to revisit how CIR interacts with rate changes, financing costs, refinancing activity, and group ratios.

The practical impacts to consider include: whether the group is better served by the fixed ratio method or the group ratio method; whether any refinancings, hedging arrangements, or new intercompany loans alter the overall tax-interest profile; and whether there are risks around the integrity and supportability of group ratio calculations.

Groups should also ensure that CIR compliance processes are robust. This includes identifying the reporting company, ensuring elections and statements are properly made, and confirming that information flows between finance, treasury, and tax teams are timely. In practice, problems arise not because the principles are misunderstood, but because data is incomplete, late, or inconsistent across entities.

An important “group reality” is that financing decisions are usually made on a consolidated basis, while tax is computed on an entity basis. The potential for stranded interest, disallowed interest, or mismatched reliefs means that treasury policy should be reviewed with a tax lens. In 2024/25, consider whether there is a need to restructure intercompany financing, adjust guarantee fee policies, or revisit debt pushdown strategies (where relevant) to ensure outcomes are sustainable and aligned with transfer pricing.

5) Loss relief rules, group relief, and strategic use of losses

Loss relief for corporation tax has evolved in recent years and is now a strategic planning area for many groups. Groups should consider both the flexibility and the constraints: how losses can be carried forward, how they can be group relieved, and how restrictions may apply for larger profit groups.

In 2024/25, groups should model the use of carried-forward losses against expected profit profiles and consider whether there are “trapped” losses in certain entities that might benefit from structural changes, while being mindful of anti-avoidance rules and commercial substance. It is also vital to consider the impact of profits moving between entities due to changes in transfer pricing, management charges, or supply chain arrangements, as these can change where losses are utilised.

Groups should also pay attention to administrative requirements around group relief claims and surrenders. Ensure deadlines are tracked, elections are made where needed, and supporting computations are maintained. In a group environment, a missed deadline or poorly evidenced surrender can create both cash tax and financial statement impacts.

6) Transfer pricing: documentation and increased expectations

Transfer pricing is not new, but the compliance and governance expectations for groups continue to grow. In 2024/25, UK groups and multinationals should treat transfer pricing as an area where “how” you document and manage the policy can be as important as the policy itself.

For groups, key considerations include: ensuring intercompany agreements match actual conduct; keeping benchmarking and economic analysis current; aligning transfer pricing with value creation; and having a clear process for annual true-ups and adjustments. Many groups also need to manage “two-way risk”: the UK tax authority may challenge the UK outcome, while foreign tax authorities may challenge the corresponding outcome in their jurisdictions, potentially leading to double taxation if not managed carefully.

From a corporation tax perspective, transfer pricing affects the taxable profit of each UK company and therefore influences rate bands, loss utilisation, CIR interaction, and even the ability to benefit from certain reliefs. Where groups have made operational changes, expanded shared service centres, or altered supply chain footprints, 2024/25 is a good time to revalidate the transfer pricing framework and ensure it remains defensible.

7) Hybrid mismatch and anti-avoidance rules: ongoing group vigilance

Hybrid mismatch rules and other anti-avoidance provisions can apply unexpectedly in groups with cross-border financing, entities treated differently for tax purposes in different jurisdictions, or structures involving partnerships or transparent entities. Even if a group believes it has “cleared” these issues historically, changes in facts or counterparties can create new exposures.

In 2024/25, groups should revisit their cross-border funding map and check whether any instruments, entities, or arrangements could create deduction/non-inclusion outcomes, double deductions, or imported mismatch risks. The objective is not necessarily to unwind legitimate commercial arrangements, but to ensure the tax outcomes are understood, documented, and compliant.

A practical point for groups is that these rules often require an understanding of how foreign tax systems treat the same arrangement. That means the UK tax team may need input from overseas tax colleagues or external advisers. Establishing a repeatable annual review process can reduce surprises when computations are prepared.

8) The diverted profits tax and “avoided PE” style risks

Groups operating cross-border, especially with significant UK sales or functions, should remain alert to diverted profits tax (DPT) and related permanent establishment (PE) risks. While DPT is a separate tax regime, it sits alongside corporation tax and can influence how groups approach UK profit attribution, transfer pricing, and operational footprint.

In 2024/25, consider whether any changes in the group’s business model, the location of decision-making, the use of UK-based personnel, or the contractual arrangements with customers or suppliers could increase PE risk. This is particularly relevant for groups that have increased remote working, decentralised commercial activity, or shifted sales and negotiation functions.

Where DPT or PE risk is identified, proactive action can include re-documenting responsibilities, revisiting intercompany contractual structures, or considering whether an increased UK taxable presence is commercially and tax-efficient compared with ongoing risk management and uncertainty.

9) Pillar Two and large group readiness: data, systems, and UK interaction

The global minimum tax landscape has become a major issue for large multinational groups, and the UK has implemented mechanisms designed to operate within that framework. Even if your group’s ultimate exposure is expected to be limited, the compliance and data burden can be substantial.

For 2024/25, groups in scope should focus on readiness: whether systems capture the required data at entity level, how to map accounting data to the tax calculations, how to handle deferred tax adjustments, and how governance will work across jurisdictions. Importantly, the interaction with UK corporation tax is not simply a “rate comparison”; it is a broader exercise in aligning financial reporting, local tax computations, and global reporting requirements.

Groups that are not obviously in scope should still confirm whether they might be indirectly affected, for example through investor reporting expectations, lender covenants, or counterparties that request information as part of their own compliance. If your group is near threshold levels or expects acquisitions or growth that might bring it into scope in future, building foundational processes in 2024/25 can prevent rushed implementation later.

10) Quarterly instalment payments and cash tax forecasting for groups

Group companies often face challenges in predicting cash tax, especially where profits are volatile, reliefs are significant, or the group is within quarterly instalment payment (QIP) regimes. The corporation tax rate structure and the use of reliefs such as full expensing can materially change cash tax timing.

In 2024/25, groups should assess whether their current approach to tax forecasting is sufficiently granular at entity level. A consolidated forecast can mask the fact that one entity is in a payment regime and another is not, or that certain reliefs are trapped in specific entities. Better forecasting reduces late payment interest exposure and helps manage working capital.

Groups should also revisit their internal tax funding arrangements. For example, if a parent company funds tax payments centrally, make sure intercompany balances, cash transfers, and documentation reflect the reality of who is paying and why, and that any intercompany interest or fees are appropriate and supportable.

11) Compliance changes, digitalisation, and HMRC engagement

The direction of travel in UK tax administration continues toward more transparency, more structured data, and more frequent engagement—especially for larger groups. For many groups, the “change” is less about a single legislative amendment and more about the cumulative increase in compliance expectations.

In 2024/25, groups should consider whether their corporation tax compliance process is efficient, well-controlled, and auditable. That includes: maintaining clear documentation for key judgments, ensuring reconciliations between statutory accounts and tax computations, retaining evidence for relief claims, and having a consistent approach to uncertain tax positions (whether disclosed in financial statements or managed through internal governance).

For groups within customer compliance manager (CCM) frameworks or with regular HMRC interaction, the tone and quality of engagement matter. A proactive approach—sharing explanations of significant items, notifying HMRC of material changes, and responding quickly with coherent support—can reduce the risk of prolonged enquiries and reputational issues.

12) Group restructurings, mergers, and the tax consequences in 2024/25

Many groups use 2024/25 as a planning year for reorganisation: simplifying legal structures, separating businesses, integrating acquisitions, or preparing for disposals. Tax changes and administrative expectations should be embedded into that planning.

When considering restructurings, groups should examine: the availability of group relief and whether it might be restricted post-restructure; the impact on associated company counts and effective rates; the transfer pricing implications of shifting functions and risks; the availability of capital allowances on transferred assets; and potential stamp taxes and indirect tax impacts (even though those are outside corporation tax, they affect the overall cost).

A key group-specific issue is that reorganisations often create accounting adjustments that then feed into tax computations. For example, fair value adjustments, impairment, or changes in intercompany balances can produce tax-sensitive outcomes. Close coordination between accounting, tax, legal, and treasury teams is essential so that decisions are made with a complete view of consequences.

13) Intragroup services and management charges: rate-driven sensitivity

Management charges and intragroup services are common in groups, and they are often set to recover costs, allocate overheads, or centralise functions. In a world with rate bands and marginal relief, the placement and amount of these charges can affect the effective tax rate in ways that are more pronounced than before.

In 2024/25, groups should revisit their management charge policies to ensure they remain transfer pricing compliant and commercially rational. Review the basis of allocation, the benefit received by recipients, and whether mark-ups (if used) are appropriate. Where charges have historically been adjusted late in the year, consider whether the governance around true-ups is sufficient and whether the adjustments create avoidable volatility in rate calculations or QIP positions.

If your group relies on centralised “service company” models, consider whether the service company is in a position to claim certain reliefs (such as R&D relief in limited scenarios) or capital allowances, or whether it becomes a bottleneck that traps deductions. These issues can be addressed through careful contracting and operational alignment, but they require deliberate attention.

14) International elements: withholding, double tax relief, and UK computations

While this article is focused on UK corporation tax changes, group companies should not ignore the international aspects that feed into UK tax. Overseas withholding taxes, foreign exchange movements on loans, and double tax relief claims can all affect UK tax liabilities and effective rates.

In 2024/25, groups should ensure that double tax relief claims are well-supported, that treaty positions are documented, and that foreign withholding taxes are tracked accurately. Particularly for groups with multiple income streams (royalties, interest, services, or digital revenue), the practical challenge is often in data collection rather than tax theory.

Additionally, the increasing focus on substance and anti-avoidance globally means that arrangements once treated as low risk might now attract more questions. A prudent approach is to integrate international tax data into the UK compliance workflow early, rather than trying to bolt it on at the end of the year.

15) Financial reporting: deferred tax and effective tax rate management

Corporation tax changes and associated group impacts are often felt most immediately in financial statements. Deferred tax balances can swing due to rate changes, relief timing, and reassessments of future profitability. For groups, the effective tax rate (ETR) is frequently a key metric monitored by boards, investors, and lenders.

In 2024/25, tax teams should work closely with finance to ensure that deferred tax assumptions are consistent with forecasts and that the tax disclosures reflect the group’s position accurately. The interaction between capital allowances (including full expensing), loss utilisation restrictions, and interest restrictions can create complex deferred tax positions that need clear explanation.

Where the group is subject to minimum tax rules or is preparing for them, the financial reporting implications can become even more significant. That includes the recognition of top-up taxes, the treatment of deferred tax under those regimes, and the narrative around how the group’s ETR may evolve.

16) Practical checklist for group companies in 2024/25

To translate the themes above into action, here is a practical checklist for group companies to consider during the 2024/25 financial year:

1) Confirm associated company counts and model the effect on marginal relief across all UK entities, including expected changes due to restructurings or acquisitions.

2) Review capital expenditure plans: identify qualifying expenditure for full expensing and AIA, check asset ownership structures, and ensure fixed asset registers support robust claims.

3) Update R&D processes: align contracting and recharge arrangements with the current relief rules, improve project governance, and strengthen documentation.

4) Reassess CIR exposures: choose the optimal method where appropriate, ensure data quality, and align treasury policy with transfer pricing and tax outcomes.

5) Model loss utilisation: forecast profit/loss profiles by entity, identify trapped losses, and ensure group relief claims are timely and evidenced.

6) Refresh transfer pricing documentation: ensure intercompany agreements match conduct, review benchmarking, and establish a disciplined process for true-ups.

7) Conduct a cross-border mismatch review: map hybrid risks and imported mismatch exposures, and coordinate with overseas teams for foreign tax treatment insights.

8) Evaluate PE and DPT risks: review where key people functions occur, how contracts are concluded, and whether operational changes have altered risk.

9) For large groups, advance minimum tax readiness: build data pipelines, define governance, and align tax and finance teams on methodology and reporting.

10) Strengthen cash tax forecasting: align entity-level forecasts with payment regimes, confirm internal tax funding arrangements, and monitor interest/penalty risk.

Conclusion: use 2024/25 to reduce risk and improve outcomes

For group companies, the 2024/25 financial year is an opportunity to turn recent corporation tax reforms into practical advantages while reducing uncertainty. The most successful groups are those that treat tax as part of a broader operating system: governance, data, contracting, forecasting, and documentation all working together. That approach supports defensible positions, smoother compliance, fewer surprises in HMRC interactions, and better alignment between tax outcomes and commercial reality.

By focusing on the areas most likely to affect groups—rates and marginal relief mechanics, capital allowances and investment planning, R&D methodology, interest restriction management, loss utilisation, and transfer pricing governance—finance and tax teams can materially improve both compliance confidence and cash tax efficiency. The key is to start early in the year, use robust data, and make sure every major commercial decision is reviewed through a group-wide tax lens.