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HMRC internal manual

Capital Gains Manual

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

If a pre-entry asset is treated as the same as an asset held by a company at a later time, the second asset is also treated as a pre-entry asset.


The loss vehicle LV joins the M group holding a leasehold interest with an unrealised loss. The lease is transferred at no gain/no loss to another company in the M group which acquires the freehold reversion, and then sells the freehold at a loss to an unconnected third party. The loss is a loss on the disposal of a pre-entry asset.

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.