Restrictions: pre-entry loss: time-apportionment: not pooled
The pre-entry proportion of the loss on disposal of a pre-entry asset is the aggregate loss which results from applying a straight line time-apportionment formula to each item of ‘relevant allowable expenditure’, see CG47621+. Relevant allowable expenditure is acquisition or enhancement expenditure within TCGA92/S38 (1)(a) or (b) (paragraph 2(9) Sch 7A). The time-apportionment formula is
A x B x D
The following definitions apply.
A is the total amount of the allowable loss.
B is each item of relevant allowable expenditure.
C is the total of all the items of relevant allowable expenditure taken into account in the computation of the allowable loss.
D is the period beginning with the time the expenditure in B is treated as incurred under TCGA92/S54 (or 1 April 1982 if later) and ending with the relevant time, that is, the time a company brought the pre-entry asset into the group, paragraphs 1(5), 2(2) and (3) Schedule 7A. If the expenditure was incurred after the relevant time, D is nil.
E is the period beginning with the time the expenditure in B is treated as incurred under TCGA92/S54 (or 1 April 1982 if later) and ending with the date of the disposal, paragraph 2(2) and (3) Schedule 7A.
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.