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HMRC internal manual

Capital Gains Manual

Restrictions: capital losses: identifying pre-entry losses: rule


There is a general asset identity rule which applies where the value of one asset derives from another asset. An asset held by a company is treated as the same as an asset held at a later time by that company, or by any other member of the same group, if the value of the second asset derives from the first. This applies in particular where the first asset is a lease, and the second asset is the freehold of the same property, the lessee having acquired the freehold reversion.

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.