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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Restrictions: identifying pre-entry losses: qualifying corporate bonds


If, on a share exchange or other reorganisation, a company issues securities which are capital gains exempt qualifying corporate bonds (QCBs), the normal paper for paper roll-over rules do not apply. This is the result of TCGA92/S116, see CG53709+. For transactions within Section 116, the chargeable gain or allowable loss is computed at the time of the reorganisation, but is deferred, and crystallises for capital gains purposes on a disposal of the QCBs. If the reorganisation takes place before the loss vehicle joins the relevant group, but the disposal crystallising the loss does not take place until afterwards, the loss is nonetheless treated as a loss accruing before the loss vehicle joins the 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.