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HMRC internal manual

Capital Gains Manual

Restrictions: capital losses: introduction: general: FA2000 changes

FA2000/SCH29/PARA1 removed the UK residence restriction for group membership. For the purposes of the loss buying provisions of TCGA92/SCH7A, FA2000/SCH29/PARA7 provides that from 21 March 2000 the group to be considered in deciding whether a company has joined a group is the worldwide group, without any residence restrictions on membership. FA2000/SCH29/PARA7 (3) introduced rules to prevent loss importation by

  • an existing group member becoming resident in the UK and utilising the loss latent in an asset at the time of becoming resident to cover gains on assets held elsewhere in the group, or
  • an existing overseas group member introducing an asset with a latent loss into a UK permanent establishment and utilising the loss against UK gains on assets held elsewhere in the group.

There may be cases where before 21 March 2000 a company was a direct or indirect subsidiary of a non-resident company. From that date, for the purposes of Schedule 7A, such a subsidiary will be a member of a group headed by the non-resident parent. The subsidiary may not previously have been a member of any group under the group definition in force before 21 March 2000, or have been a member of a group restricted, before the changes in FA2000/SCH29/PARA1, to companies resident in the UK. There are specific rules to cover such situations, see CG47989.