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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Capital loss streaming from 19 July 2011: set off of restricted losses: (ii) more than one company joining a group together

TCGA92/SCH7A/PARA7(3)

The rules cover the situation where two or more companies leave one group and join another group at the same time.

An accrued loss brought into the new group by one of the companies can be deducted from a gain accruing to that company on the disposal an asset held by another of those companies immediately before it joined the new group, TCGA92/SCH7A/PARA7(3)(a).

Similarly, an accrued loss brought into the new group by one of the companies can be set against a gain accruing to that company on the disposal of an asset that was acquired by another of those companies (from a person who was not a member of the group) for use in the trade or business of the company with losses, TCGA92/SCH7A/PARA7(3)(c).

Example

In 2011, company D accrues a loss. D has a subsidiary E which owns asset X.

In 2012 D, together with E, is acquired by F.

In 2013 E disposes of X and a gain accrues. E and D elect under TCGA92/S171A so that the gain is transferred to D.

TCGA92/SCH7A/PARA7(3)(a) treats D as holding X immediately before it joined the F group. Therefore D can deduct the restricted loss from the gain.

Note: Additional rules relating to loss buying were enacted in FA 2006. See CG47020+ for guidance on the rules which apply in priority to TCGA92/SCH7A for accounting periods ending on or after 5 December 2005.