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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Restrictions: capital losses: identifying pre-entry losses: relevant group

The relevant group is the group into which the company brings the pre-entry loss, or the asset on which the loss subsequently arose. If there is more than one such group, there are rules which identify the group or groups to which the provisions apply, see CG47910+.

The time at which the company holding the pre-entry asset becomes a member of the relevant group is known as the `relevant time’, see CG47567. There are special rules covering cases where a company joins the same group on more than one occasion, see CG47568, and company takeovers and reorganisations, see CG47569+.

EXAMPLE

Group L has a subsidiary LV, which is carrying forward a loss £1M on the disposal of an asset in 1988.

In 1992, group L sells the loss vehicle LV to a company in the M group.

The relevant group is the M group. The whole of LV’s loss £1M is a pre-entry loss, since the loss accrued on a disposal by LV before it joined the M group.

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.

FA11/S46 and FA11/SCH11 greatly simplified the rules in TCGA92/SCH7A for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.